After the central bank, the Securities & Exchange Commission of Pakistan has now been aiming to promote investment in the real estate sector through Real Estate Investment Trusts (REITs).
REITs are companies that raise funding from the general public and institutions such as banks, and deploy these funds through investment in real estate properties.
The SECP says it has revamped the regulatory framework to facilitate REITs.
“The amendments have shifted the regulatory structure from approval-based to disclosure-based issuance, reducing entry barriers for new REITs,” the SECP said in a statement.
“It will help in making REITs competitive with the unorganized sector led real estate projects, attracting domestic and foreign investment into the formal real estate sector of the country.”
The SECP says the amendments are in conformity with domestic market conditions and globally recognized norms.
The revised framework has segregated conventional and infrastructure categories, which are Non-Public Private Partnership REITs (for conventional projects) and Public Private Partnership REITs (for P3 infrastructure projects).
REITs may now pursue developmental, rental or hybrid options under both these classifications.
The SECP said that regulatory approvals and document submission requirements of REITs have been made easier.
An REIT Scheme can invest in real estate, either directly, or through acquisition of shareholding of the company, that owns the real estate. The earlier condition of transferring the title of real estate in the name of an REIT Scheme has been eliminated.
Approval of real estate is no longer required from the SECP, as the onus of evaluating the quality of the property is on the REIT and the trustee.
Limits on leverage and performance fees have also been uncapped and permission has been granted to allow the use of customer advances for project-related expenses.
In addition, the existing Non-PPP REIT schemes are allowed to acquire additional real estate in existing REIT schemes with the approval of the unitholders (shareholders).
The PPP REITs are allowed to partner with the government for PPP infrastructure projects. It is ensured that the REIT regulations would not create any interference with the terms of the concession agreement — the main document governing PPP infrastructure projects.
Currently, only Arif Habib Dolmen REIT is listed with the Pakistan Stock Exchange and functioning at the moment.
According to the SECP, five new REITs have registered with them in the last two years.
A total of 10 REITs are currently registered with the SECP, with two more in the pipeline.