SECP recommended broadening scope of REITs assets in Pakistan

• The SECP has recommended broadening the scope of REITs assets in Pakistan.
• The proposed regulatory changes aim to introduce new REIT products and make it easier for RMCs to launch various REIT schemes.

The Securities and Exchange Commission of Pakistan (SECP) has recommended broadening the scope of Real Estate Investment Trusts (REITs) assets in Pakistan, which include agriculture, healthcare, transportation, power/energy, and telecommunication.

According to the SECP’s concept paper, “Review of Landscape and Revamping Framework-REITs,” the current regime requires at least seven different approvals, making REITs less competitive; the universe of REIT assets and infrastructure is limited, and the regulatory overburden in terms of segmented reporting and approvals leads to no value addition.

The proposed regulatory changes aim to introduce new REIT products, make it easier for RMCs to launch various REIT schemes, and convert to a reporting-based regime.

The REIT Scheme is being expanded to include the following additional segments:

1. Agriculture
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2. Healthcare
3. Transportation
4. Power
5. Energy
6. Telecommunication
7. Water and sanitation
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8. Social, cultural, and commercial segment
9. Any other segment/real estate asset as permitted by the commission.

A wide range of projects can be developed under the REIT Scheme according to proposed modifications.

In addition to non-PPP REIT schemes (“Hybrid REIT Schemes”), a new type of REIT plan titled Investment based REIT Scheme is being suggested: under the proposed scheme, the RMC would solely serve as an investment business rather than a developer.

The RMC will be in charge of investing in multiple real estate units, excluding land, with the goal of maximising return for unit holders; a pool of funds can be invested in units of various real estate projects generating rental income, such as residential units, commercial properties, healthcare facilities, amusement parks, shops, and so on; and rental income from real estate can be distributed among unit holders.

The RMC would solely serve as an investment firm rather than a developer under the proposed model.

The RMC will be in charge of investing in multiple real estate units, excluding land, with the goal of maximising return for unit holders; a pool of funds can be invested in units of various real estate projects generating rental income, such as residential units, commercial properties, healthcare facilities, amusement parks, shops, and so on; and rental income from real estate can be distributed among unit holders.

Over the previous few years, the SECP has implemented a number of regulatory reforms pertaining to the operation of REIT(s). The number of REIT Management Companies and registered REIT schemes has increased as a result of subject reforms. However, the REIT sector is fresh to our industry and has enormous development potential.

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