First Shariah approved REIT scheme has been introduced

Under the new Real Estate Investment Trust regulatory framework, the Securities and Exchange Commission of Pakistan (SECP) has approved the registration of Pakistan’s first Shariah approved developmental Real Estate Investment Trust (REIT) scheme.

“The Arif Habib Dolmen REIT Management Ltd, a company with a successful track record of launching the country’s only Real Estate Investment Trust scheme. It has successfully partnered with leading business groups for entering into an arrangement with a commercial bank, enabling the launch of the Shariah approved first REIT Scheme known as the Silk Islamic Development REIT (SIDR),” according to an SECP official.

Yunus Brothers Group, which owns Lucky Cement Ltd, Fatima Group, Arif Habib Corp, Liberty Group, and Arif Habib Dolmen, are also partners in SIDR.

The first REIT scheme calls for investments in undeveloped land in Karachi to improve the neighborhood and develop real estate and the building and sale of apartments and commercial units by the Real Estate Investment Trust Management Company to generate income for unit holders. Following scheme registration and permission for unit issuance, the first REIT scheme can raise funds by selling units to private investors to fund the acquisition and development of the proposed real estate.

Arif Habib Dolmen Real Estate Investment Trust seeks to raise PKR 8 billion for a housing project in Karachi through private placements in two Real Estate Investment Trusts, including SIDR. The SIDR will concentrate on apartment complexes and commercial ventures, and the Shariah approved REIT, which comprises real estate developer World Group, will focus on villa development. Arif Habib Dolmen’s chief executive officer, Muhammad Ejaz, said the company planned to buy the site in roughly two months, partly from Silk Bank Ltd.

It is a Shariah approved Real Estate Investment Trust with an estimated internal rate of return of more than 30 percent. Mr. Ejaz noted that the older Real Estate Investment Trust, which contains Karachi’s most well-known mall and an office tower, pays a dividend yield of roughly 12 percent each year.

The SECP considerably revised the Real Estate Investment Trust Regulation 2015 earlier this year. It indicates that the revisions have proven to be the necessary catalyst for the Real Estate Investment Trust industry, which had previously been inert.

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Revisions to the Real Estate Investment Trust Regulations in 2015 only resulted in the implementation of one rental scheme, while subsequent amendments in 2018 failed to achieve the anticipated result of mobilizing more such projects across the country.

Growth in the Real Estate Investment Trust sector will result in improved documentation, formalization, governance, transparency, investor protection in the industry of real estate, and the chance for small investors to profit from the sector’s growth.

Prime Minister Imran Khan’s incentives and legislative measures to make Real Estate Investment Trusts more appealing to investors and developers are scrutinized by the sector.

While tax evaders were offered incentives if they invested in construction projects and told banks to boost their outstanding mortgages by at least 5% by December, Finance Minister Shaukat Tarin reduced the dividend payment tax on Real Estate Investment Trusts from 25% to 15% in the 2018 budget.

Mr. Ejaz of the Arif Habib Dolmen said, “The administration has chosen the correct sector for growth.”