Govt introduces new REIT regulations

KARACHI:

Pakistan has advanced its journey towards transforming the multibillion rupees’ real-estate sector into a formal sector of the domestic economy, as the government has introduced new Real Estate Investment Trust (REIT) regulations and allowed the establishment of new REIT companies.

The apex regulator, Securities and Exchange Commission of Pakistan (SECP) has allowed REIT companies to raise financing for agriculture projects, mobile tower projects and renewable energy (solar and wind power) projects by introducing REIT Regulations 2022, two weeks ago.

Earlier, the scope of REIT projects was limited to the development (construction) sector and rental real-estate projects.

The SECP has also allowed the establishment of REIT general purpose investment funds (like mutual funds) to attract capital from investors that can be invested in any of the REIT projects, said Arif Habib Dolmen REIT Management Limited (Ahdrml) CEO, Muhammad Ejaz while speaking to the Express Tribune ahead of the listing of its second REIT – Globe Residency REIT (GRR) – at Pakistan Stock Exchange (PSX) next week.

Over the past one year, the SECP has issued some 16 licenses for the establishment of REIT management companies. About a year ago, there were only a couple of such companies in existence. The June 2021 regulations (amendments) have allowed the corporate sector to establish REIT companies and projects.

“REIT is the present and future of real-estate projects in Pakistan,” said Ejaz, adding that the REIT projects do not only establish the investors’ trust (including the general public) but also helps document the economy.

“The documentation of real-estate projects, through REITs, paves the way for transforming the informal (undocumented) real-estate sector into the formal sector of the economy,” explained Ejaz. “There are some 11 REIT projects worth Rs600 billion in progress at present,” he added. “More importantly, REIT projects enable the common man to increase investment and develop saving habits,” Ejaz noted.

Ahdrml is offering 10% units (14 million units) of GRR at Rs10/each to the general public through PSX on December 14 and 15, 2022, raising an equity amount worth Rs140 million to the company. It is mandatory to have REIT projects listed at a bourse in Pakistan. The projects should be listed within a three-year span from the time of registration.

Ejaz further remarked that “GRR is a closed-ended developmental REIT scheme with a limited life of 48 months, offering investors the opportunity to become an investor in the Globe Residency apartment projects in Karachi.”

“The project cost is estimated at Rs20 billion and the REIT fund size is Rs2.8 billion, including Rs1.4 billion each of debt and equity,” explained Ejaz. GRR is one of a dozen REITs to be listed over the next couple of years at PSX, which include seven newly created development REITs with an estimated project cost of Rs450 billion.

Published in The Express Tribune, December 10^th, 2022.

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