TEXT: Transforming the Real Estate sector into a fully documented ecosystem founded on Transparency and Liquidity.
The Pioneers of REITs in Pakistan!
HISTORY OF REITs
Real Estate Investment Trusts (REITs) are globally recognized as a revolutionary way to enable individuals and institutions to invest in real estate without directly owning or managing physical properties. Introduced in the United States in the 1960s, REITs have since transformed real estate markets in countries across the globe, offering greater liquidity, transparency, and inclusivity for investors.
In Pakistan, REITs were introduced to fill the growing need for structured and transparent investment vehicles within the real estate sector. The first REIT framework was established in 2008, with updated regulations (latest in 2022) and increased institutional interest, REITs have gained traction. Pakistan's urbanization and rising demand for commercial and residential projects have underscored the immense potential of REITs to formalize, grow, and modernize the real estate market.
REITs IN PAKISTAN
The Securities and Exchange Commission of Pakistan (SECP) has been instrumental in improving REIT regulations to ensure transparency, compliance, and investor security. REITs are defined as listed, closed-end funds / schemes.
REIT Structures - Direct Investment Structure: REIT Schemes directly invest in REIT Projects / Real Estate
Special Purpose Vehicle (SPV) Structure: REIT Schemes invest in shares of company (SPV) (for execution of / investment in REIT Projects / Real Estate)
Arif Habib Dolmen REIT Management’s Role
Arif Habib Dolmen REIT Management Limited (AHDRML) is Pakistan’s pioneer REIT management company, playing a key role in shaping the REIT landscape. Combining deep expertise, strategic partnerships, and a strong commitment to transparency, AHDRML has set benchmarks for the industry.
The Benefits and Impact of REITs in Pakistan
Enhancing Liquidity:
REITs play a crucial role in enhancing liquidity in the real estate market. Traditionally, real estate transactions have been cumbersome and capital-intensive. REITs simplify this process, enabling investors to buy units (shares) in multiple real estate projects with ease. This allows developers to access much-needed funds and deliver bigger and better projects at a faster pace.
Diversification:
Investing in REITs allows investors to diversify their portfolios by spreading capital across various property types, such as: Office spaces, Retail, Hospitality projects and Industrial developments.
Maximizing Yields:
REITs generate steady rental income and long-term capital gains. Their structured nature ensures greater efficiency, which ultimately enhances yields for investors.
Managing Risk:
REITs operate under strict oversight and due diligence protocols. Stakeholders such as trustees, auditors, rating agencies, and property managers ensure: Property legitimacy and legal compliance, Adherence to development specifications, Transparent supervision of all processes, ensuring minimal risk for investors.
Socio-economic and Market Impact
Unlocking Land Value:
REITs unlock the true value of land by formalizing real estate transactions and expanding market size. This benefits developers, investors, and the overall economy.
Boosting Savings and Investment:
REITs provide an attractive, inflation-hedged investment option for savers. This makes them ideal for: Retirees, Insurance companies, Pension funds and Charitable foundations.
Attracting Foreign Direct Investment:
Transparent processes, defined roles, and institutional oversight attract foreign and local investors, strengthening the economy and generating employment.
Stabilizing the Market:
REITs bring discipline to real estate development, avoiding speculative booms and busts. By improving planning and execution, REITs promote sustainable growth.
Types of REIT Schemes
Rental REIT
That invests in commercial or residential Real Estate to generate rental income.
Developmental REIT
that invests in Real Estate for industrial, commercial, or residential development through construction or refurbishment.
Hybrid REIT
having both a portfolio of Real Estate for rent and development.
Investment Based REIT
established for making investment in portfolio of REIT projects / Real Estate for capital gains purpose.
Copyright Business Recorder, 2024
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