The Relationship Between The Innovation Of Profit Model And Financing In China's Real Estate Industry

Under the background of "mass entrepreneurship and innovation",innovative profit models are emerging and real estate enterprises are in transition.The profit model adopted by ordinary housing enterprises prior to the transition is relatively simple,for land transfer income and real estate sales income are their major source of profits.With the changes in factors such as high pressure of policies,slowing economic growth,fierce competition in the industry,and weak profitability of housing enterprises,the profit model of traditional real estate enterprises has been challenged.In addition,the core city has entered the stage of "great construction and great beauty" since "great demolition and consolidation".The optimization of urban function orientation and the upgrading of stock assets have become the new demand in the urban development,which also provide a new opportunity for the transformation of traditional housing enterprises' profit model.What are the innovative profit models in the real estate industry? Is the profit model of individual housing enterprises universally applicable? This is the issue that this article will explore.Compared to general enterprises,real estate development has a typical capital-intensive nature,and financing activities are the key to the survival and development of real estate enterprises.In the context of monetary tightening,the difficulties in financing and rising financing costs have become an important reason for restricting the development of real estate companies.At the same time,the housing enterprises began to explore new financing methods such as offshore financing,Real Estate Investment Trusts(REITs),Commercial Mortgage Backed Securities(CMBS),and Supply Chain Asset Backed Securitization(Supply Chain ABS).Under the background of innovation in the profit model of housing enterprises and continued tightening of financing,how can traditional housing enterprises effectively use new financing methods? Will the effective use of new financing methods boost the innovation of the profit model? What are the impacts of changes in the profit model on financing activities? This is another aspect that this article will pay attention to.In the new economic normal state,the real estate industry has undergone cross-border transformation and explored new profit models.Under the background of monetary tightening and limited traditional financing methods,the real estate industry is actively exploring new financing methods.Based on the two new characteristics of the real estate industry development,this paper explores the relationship between the innovation of the real estate industry's profit model and the financing activities,and evaluates the virtuous cycle of the two-phase integration.There are six chapters in the full text,which are as follows:The first chapter is introduction.It introduces the background and significance of the research,puts forward the research content and framework,as well as introduces the research methods and research contributions,so that readers have a preliminary understanding of the paper.The second chapter is literature review.This part mainly sorts out and summarizes the research results related to the profit-making model and financing.The third chapter is the theoretical basis and theoretical construction.First of all,this part introduces the theoretical basis of the profit model and financing activities.Then,according to the interpretation of the literature and the theoretical basis,the author further constructs the framework of the relationship between profit model innovation and financing activities,and puts forward four hypotheses of this paper.The fourth chapter is the background of the case.This section analyzes the ideas why choose Vanke as the case,briefly introduces the overall situation of Vanke and show Vanke's profit models and financing innovation before and after the transition.The fifth chapter is a case study.First of all,this section demonstrates the four propositions constructed in Chapter Three through case analyzing.The paper probes into how the transformation of Vanke's light assets can improve internal financing and external financing capacity,how the diversification of financing activities can drive Vanke's profit model and how the innovation of financing activities can promote the smooth transformation of the light asset profit model.The sixth chapter is conclusion,suggestion and prospect.In this chapter,the author summarizes the conclusions of this paper,proposes suggestions for the problems found in the research process,and puts forward the research prospect for the shortcomings of the research.Through the analysis of the case company of Vanke,this paper demonstrates the theory constructed,and then draws the following three conclusions:Firstly,the change of profit model and financing innovation form a virtuous circle.On the one hand,the transformation of light assets has improved Vanke's internal financing capacity and external financing capacity.On the other hand,the innovation and diversification of financing contribute to the establishment and innovation of Vanke's profit pattern.In detail,diversified financing has created plenty of cash flow for the operation of profit-making model,furthermore,the innovation of financing not only reduces the cost of capital,but also provides a new profit source for Vanke,reduces the profit model's operational risk,reduce the weight of the assets,thus contributes to the smooth transition of Vanke's profit-making model.Secondly,the innovation of profit model and financing will increase enterprise value.According to the characteristics of the real estate enterprises,the author selects EVA to evaluate the economic consequences of Vanke's profit-making model and financing activities.It has been found that vanke has further improved the enterprise value,reduced the capital cost and raised the capital profit margin through light asset transformation and financing innovation.Thirdly,the profit model is not invariable,and asset-light operation is one of the effective ways to realize the profit model innovation of traditional housing enterprises.With the asset-light profit model,from the perspective of smile curve,Vanke has invested into R&D and service,which have higher rates of return;from the perspective of business operations,Vanke has established an ecosystem with traditional housing,industrial real estate,and commercial real estate as the core.The asset-light operation mode has not only effectively solved the drawbacks of the heavy-asset profit model,but also catered to the new trend of policy development.Compared with the original literature,the innovation of this paper lies in the following three aspects:Firstly,from the perspective of research content,there are many studies related to the profit model and financing activities,but no scholars have established a connection channel between the profit model and financing activities.This article explores the benign interactive relationship between profit model innovation and financing activities,enriches the theories related to the profit model and financing activities,and makes up for the research gap.Secondly,from the perspective of research methods,the existing literature generally adopts the financial index method or the Dupont analysis method to evaluate the profit model or financing activities of enterprises.After constructing the relationship between the profit model and financing activities,according to the characteristic of real estate companies(such as long construction period,high operational risk,and slow cash flow),this paper further uses EVA to intuitively evaluate the virtuous cycle of profit model and financing activities.It provides a reference path for the quantitative analysis of the profit model and financing activities.Thirdly,from the perspective of research angle of view,although some scholars have proposed the significance of financing diversification and financing innovation for the development of enterprises,it can't be ignored that policy factors,changes in the economic situation,and the need for business development are keys to the use of new financing activities.This article explores the relationship between profit model and financing activities under the background of policy and economic changing,and provides reference for real estate companies to solve the problem of financing difficulties.Of course,there are still some deficiencies in the article:Firstly,there are many tools for measuring the relationship between profit model and financing activities.This paper only selects the EVA analysis method to evaluate the economic consequences of profit model innovation and financing diversification,which has certain limitations.Secondly,policy factors have a great influence on the choice of real estate financing methods.Although this paper establishes the relationship between profit model innovation and financing activities,a particular financing method may be the best choice for profit model innovation,but real estate enterprises may not be able to use it because of policy constraints.Thirdly,this paper selects only one case to demonstrate the theory constructed,and the number of samples is limited.Whether the conclusion of the study is applicable to all enterprises remains to be verified.Under the background of profit model transformation and financing difficulties in real estate industry,this paper studies the relationship between the innovation of profit model and the financing activity,which aims to provide reference for the real estate industry to realize the innovation of profit model,and obtain stable and sufficient financial support.As for there remains insufficiency in this paper,in order to investigate the relationship between the innovation of profit model and financing activities,the author will focus on more real estate companies as much as possible.In addition,in view of the general applicability of the relationship between profit model innovation and financing activity,the case study can be extended beyond the real estate industry.For the reason that there are many tools to evaluate the economic results of profit model and financing activities,other assessment methods can be used in future.