Pakistan proposes easing rules for real estate investment funds to attract capital

• Draft reforms would lower minimum <a href="https://industrymovement.com/liba-capital-advances-miami-dade-real-estate-strategy-with-patent/" title="LIBA Capital Advances Miami-Dade <a href="https://industrymovement.com/us-real-estate-agent-duct-taped-and-zip-tied-to-plane-seat-after-racial-slurs-is-fired/" title="US real estate agent duct-taped and zip-tied to plane seat after ‘racial slurs’ is fired”>Real Estate Strategy With Patent”>real estate asset and income thresholds to 65 percent from 75 percent
• Proposals would also widen investor participation, allow some funds to invest in vacant land and plots

KARACHI: Pakistan’s securities regulator said on Thursday it had proposed easing rules governing real estate investment trusts, including lowering property-related asset and income requirements, as it seeks to attract more long-term capital into the country’s property sector.

Real estate investment trusts, or REITs, are regulated investment vehicles that pool money from investors to invest in property. Rather than buying and managing real estate directly, individuals and institutions can purchase units in a scheme that owns, develops or earns income from underlying properties.

Pakistan has sought to develop the investment vehicles to channel more institutional and individual capital into its vast real estate sector through regulated structures. REITs can take different forms, including schemes focused on rental properties, property development or a combination of the two.

Under draft amendments to the REIT Regulations, 2022, announced on Thursday, the Securities and Exchange Commission of Pakistan (SECP) has proposed reducing the proportion of income and assets that must come from or comprise real estate to 65 percent from 75 percent. The regulator said the change would give schemes greater flexibility in structuring portfolios and broaden the range of eligible projects.

“These reforms are aimed at creating a more enabling REIT framework that can mobilize long-term capital, broaden investor participation and unlock greater potential in Pakistan’s real estate sector,” SECP Chairman Kabir Ahmed Sidhu said in a statement.

The proposed changes would also allow investment-based REITs to invest in vacant land and plots, subject to regulatory requirements, while group-level trusts and employee funds would be permitted to invest in schemes that are not listed on a stock exchange.

SECP has also proposed extending the period during which schemes can borrow from sponsors, directors and associated entities to 36 months from 24 months, while retaining existing requirements for approval from investors.

Rental and investment-based REITs could receive an extension of up to one year to list when delays result from circumstances beyond the control of their managers. The proposed rules would also clarify that hybrid schemes combining investment and rental components can earn rental income from their properties while holding them.

The draft amendments have been released for public consultation and have not yet been finalized.