|Tuesday, 12 July 2011 10:55|
The Securities and Exchange Commission of Pakistan (REITS & New Initiatives Wing Specialized Companies Division) announced in mid-2007 that they were introducing the concept of Real Estate Investment Trusts in Pakistan, with rules issued in early 2008 for establishing REITs under issued Real Estate Investment Trust Regulations, making them a specialized investment vehicle. In Pakistan, REITs are required to adhere to the trust structure. The properties belong to the unit holders, vested in the name of the name of the trustee, with the REIT management company (RMC) managing them in trust for the unit holders. The RMC must have at least a 20% stake in the company, and a maximum of 50%, and does receive management fees. REITs do not pay taxes so long as they distribute 90% of profits to shareholders. They do plan to allow full foreign ownership and repatriation of profits. They must own at least 5 billion rupees worth of properties, and are only allowed to operate in Islamabad / Rawalpindi, Karachi, Lahore, Peshawar and Quetta. In addition to the REIT Management Companies (RMC) there are specific projects known as REIT "Schemes." There are two types of REIT Schemes: development; and rental. After completing a development project (which may be industrial, residential or commercial), through construction or refurbishment, it is sold. Those companies distribute the profits to the unit holders. Rental REIT Schemes own and manage rental properties (commercial real estate or residential) on behalf of unit holders, who receive a stream of dividends from the dividends from rental profits. Pakistan studied the beginning of Real Estate Investment Trusts in Malaysia. In 2009 the SECP reduced the stamp duty and registration fee for REIT properties in Punjab and Sindh provinces. In Punjab it was reduced from 2% to 0.5%. In Sindh it was reduced from 3% to 0.5%.
The SECP received 4 initial requests to form Real Estate Investment Trust management companies in Pakistan, and took a year to scrutinize them and only approved a couple. They must have at least 50m rupees at the time of application. Within 30 working days of the registration of the REIT Scheme, they must increase their capital to at least 500m rupees.
Pakistan has a large population, most of them very poor, and large shortages of affordable housing. The home construction industry cannot keep up with the need. Therefore, the government is hoping that having publicly listed in the real estate markets will help make them more efficient, providing more housing to the population, partly by attracting foreign investment, especially from the Gulf. They also wish for greater transparency, because according to news accounts, their real estate sector has a lot of corruption, including major scandals.
Pakistan A REIT framework has been introduced in Pakistan in 2008, following the enactment of the Real Estate Investment Trust Regulation by the Securities and Exchange Commission of Pakistan (SECP). REITs in Pakistan are established as closed-ended trusts. The requirements for Pakistan REITs are very similar to those in other Asian REIT markets. For example, Pakistan REITs are also required to distribute not less than 90% of their annual income to unit holders. As long as the 90% minimum distribution obligations are met, Pakistan REITs will be subject to income tax exemption. In addition, the REIT regulations also require that each REIT must have a minimum size of PKR2 billion (US$21 million) and the management company must hold at least 20% in each REIT. In March 2009, the SECP granted permission to two REIT management companies. Among four applications received,f only two were approved, whereas the other two were rejected due to their failure to meet the requirements. The two approved managers were Arif Habib REIT Management Company Ltd. and AKD REIT Management Company Ltd. Both companies have filed a number of REIT schemes with the SECP for its approval.
Source: Prof. Alex Anh Khoi Pham - University of Western Sydney: The Development of REIT Markets in Asia (1/1/2014) - Link.
|Last Updated on Sunday, 23 February 2014 14:52|