Why analysts believe H-REIT market is underdeveloped

Blame it on lack of acquisitions.

According to CBRE, the relatively immature state of the H-REIT market is partially due to the dominance of the major Hong Kong property conglomerates and Chinese property developers. 

As of end-November 2013, H-REITs accounted for just 5% of the total listed real estate market capitalisation in Hong Kong compared to over 30% in both Singapore and Japan.

Here's more from CBRE:

H-REITs' lack of acquisitions, particularly of assets in Mainland China and other overseas markets, has also played a significant role in limiting their growth.

In addition, the restrictive regulatory regime currently in place has made H-REITs a static income play, passively passing rental income to unit holders.

Whilst the H-REIT market has developed very slowly, Singapore has firmly established itself as a regional hub for cross-border REIT listings.

S-REITs have been very active in acquiring offshore assets to expand their portfolios, a trend which has solidified Singapore as a focal point for REITs in Asia.

As of end-November 2013, 16 of the 30 listed S-REITs owned overseas assets, whilst only three H-REITs had assets outside Hong Kong.

Between 2011 and Q3 2013, cross-border acquisitions by S-REITs totalled US$2.7 billion. Singapore also offers specialised industrial and healthcare S-REITs which are not available in Hong Kong.