Discussion On Private Equity Fund To Participate In The Construction Of Indemnificatory Housing

Indemnificatory housing is an important part of China’s social security system，It cansolve the housing problems of low-income people and maintain social stability. The processof construction exist many problems, such as capital bottleneck, the lag of legal system,supply and distribution of land, but a shortage of funds is the primary issue. The constructionof indemnificatory housing need a huge amount of money and the existing financing channelis unitary, so the problem of funding gap have not been effectively solved. In this case, it isurgent to broaden the financing channels, improve the financing capacity and solve theproblem of construction funds through financial innovation and system innovation.Private equity fund as a kind of innovative financial investment tool has achieved greatsuccess in the field of foreign real estate. After many years of development, private equityfund in China has reached a certain scale, so the introduction of the fund to the field ofindemnificatory housing has a strong theoretical and practical significance. In this paper, westudy the present financing situation, analyze the necessity and feasibility of using privateequity fund to solve financing difficulties of indemnificatory housing, and by collecting therelevant cases and data, combined with the actual situation of domestic private equity fundand the characteristics of indemnificatory housing, design the operation model ofindemnificatory housing private equity fund. At the same time, the paper put forward somesuggestions aiming at problems that exist in this model.The paper is divided into five chapters:The first chapter describe the paper’s background and significance, points out theresearch ideas and possible innovations on the basis of summarizing the current research.The second part is the focus of the article, including three chapters:The second chapter is the basic theory, expound the related theory of indemnificatoryhousing and private equity fund, including the definition and classification of indemnificatoryhousing, financing, the concept, characteristics, organization forms, operational process ofprivate equity fund and the concept and characteristics of indemnificatory housing privateequity funds, those theories provide the basis for further research in this paper.The third chapter explains financing bottleneck of housing and the introduction of private equity fund. Firstly, introduce our goal, the existing financing ways and the mainproblems of building indemnificatory housing. Secondly, analyze the necessity of introducingprivate equity fund from financing in many aspects, such as widen the channels of socialinvestment, promote the real estate market, perfect China’s capital markets and so on. Thispart also analyze the feasibility of taking private equity fund into indemnificatory housingfield from the relevant policies, private capital, the financial market and the development ofreal estate. Thus it is concluded that introducing private equity fund to the financing ofindemnificatory housing is necessary and feasible. At the same time, we puts forward someobstacles of this innovative financing model in the legal system, fund-raising, operation,supervision, as well as talent.The fourth chapter is the difficult part of the paper, design the operating subject, overallframework and the operating mode including setting up model, investment model, profitmodel and exit model on the basis of previous analysis. In the design of operation mode, wefind the limited partnership model is the most appropriate form of organization by comparingthe three organizational forms of private equity fund,and discusses the idea of establishingthe fund. Then design the investment model from the direction, objects, constraints, processand management. The fund is designed to fixed-income model, and make a detailed analysisof the sources of income, allocation and profit guarantee. Finally, this part design the exitmodel through the analysis and comparative of several exit mechanism which include listed,mergers and acquisitions, repurchase, project liquidation sale, bankruptcy liquidation.The last part of the paper put forward some suggestions. In order to better introduceprivate equity fund to the construction of indemnificatory housing, we need to establish andimprove the laws and regulations, the government need to formulate preferential policies andestablish effective regulatory system, at the same time we should strengthen the research inprivate equity fund and its mode of operation and training specialized talents ofindemnificatory housing private equity fund.