Land liquidity plan may use special firms, tax breaks

A comprehensive package to spur land liquidity to be drawn up Mar. 24 would include such measures as allowing thecreation of special purpose companies within Japan by fiscal 1998 to help securitize land held as loan collateral, the finance minister said Mar. 25.

Hiroshi Mitsuzuka told a news conference that the package would consist of pillars to tackle three main issues — utilization of collateralized land left in small irregular plots, encouraging the use of such land for public purposes and securitization. The plan, which would be announced on the last day of the fiscal year, is expected to have a good effect on financial institutions’ efforts to get rid of their nonperforming loans, he added.

On the issue of securitization, the government would take steps such as removing regulatory and taxation constraints to enable the process to be carried out more simply and cheaply, he said. Two methods of securitization would become possible through the new package: One using domestic trusts and another using special purpose companies set up in Japan.

As for trusts, measures would be taken to pave the way for the securitization of loans with real estate collateral. The government also envisions the establishment of special purpose companies to securitize loans by buying the assets and using them as collateral to issue securities to sell to investors.