New guideline to better regulate CMBS market

CMBS, or commercial mortgage-backed securities, are a type of mortgage-backed security that is secured by mortgages on commercial properties. [Photo/VCG]

A new guideline to CMBS will be published, and financing via CMBS will be tightened, China Securities Journal reported on Wednesday.

CMBS, or commercial mortgage-backed securities, are a type of mortgage-backed security that is secured by mortgages on commercial properties.

According to the news website, the new guideline will place strict requirements on commercial real estate valuation and income calculation, and debt service coverage ratio.

Generally, the financing of commercial real estate should not exceed 70 percent of its value.

After the new guideline are published, the financing via CMBS will become more reasonable, and only good quality property will be able to raise money from CMBS, the probability that poor quality property to raise money will be lower, and the investors' interests will be guaranteed due to the strict commercial real estate income calculation and the high debt service coverage ratio, industry insiders told China Securities Journal.

A source told the news website that his CMBS project record retention period will extend after the new guideline is carried out, although the CMBS project conformed to pervious requirements.

The potential market size of CMBS is expected to hit one trillion yuan in China, and the market is growing, said the China Securities Journal.

By Aug 21 from Jan 1 of this year, 15 CMBS projects were issued to raise 30.67 billion yuan in Chinese market.