Staff Report
ISLAMABAD: The Security Exchange Commission of Pakistan (SECP) Tuesday announced amendments in the Real Estate Investment Trust (REIT) Regulations 2015 cutting back on its conditions for the trusts to issue new schemes for investments.
REIT – companies that own, operate, or finance income-producing properties- can now invest in any real estate project without having the mandatory proprietorship of that project, SECP stated following the amendment.
The change will be a welcome move to encourage REITs in issuing new schemes for investors so real estate market sees growth, SECP said. With the amendment, REITs will be able to invest in government projects in partnership as well as any real estate project anywhere in the country.
Moreover, the leverage and performance fees’ limits have, too, been relaxed for the REITs, which means they can charge fees commensurate to the returns earned to their clients without any cap. The REITs can also use their advance funds for the expenditure incurred, which they couldn’t officially do earlier.
Earlier last week, the State Bank of Pakistan amended capital adequacy regulations, lowering the risk weight from 200per cent to 100 pc, to facilitate bank and development finance investments in REITs to boost the housing and construction sector. In order to provide further support to the development of the real estate sector, the central bank has “amended its capital adequacy regulations by significantly lowering the applicable risk weight”.
With these favorable changes for both REITs and financial institutions, investments in real estate are likely to see a surge as REITs are companies that raise funding from the general public and institutions and deploy these funds through investment in real estate properties.
