Faiza Tehseen

The Real Estate Investment Trust (REIT) is a safe and secure system offering substantial profits, said Zahid Latif Khan, Chairman of Islamabad Stock Exchange (ISE) Towers REIT Management Company. Talking to WealthPK, he said, “To earn large-scale profits from the real estate (RE) sector, it is important to promote the REIT system. Substantial profits can be earned by floating the REIT shares in the stock market. By inviting foreign investment, Pakistan can earn a hefty foreign exchange.” “This system allows individuals to invest in large-scale income-generating real estate. It is a successful model prevalent in Europe and North America. Although in Pakistan, people are not well aware of this concept, it’s becoming popular gradually,” Zahid said.

“There’re a lot of regulatory restrictions making it difficult for investors to get an REIT license. However, many reforms have taken place in the regulations and laws of the system. The SECP has provided a favorable environment to launch the REIT schemes. This is the reason that many investment companies have applied to the SECP for a license. So, in the real estate sector, REIT is a documented segment,” he said. “The REIT schemes are based on unit systems and one unit may be worth around PKR5000. By participating in an REIT scheme, one can buy minimum or maximum units according to the pocket capacity. But against the purchased units, one can easily become the shareholder of a particular real estate under this system,” he added.

“A REIT scheme offers a great incentive. If 90% of capital gain is distributed among the shareholders, there will be no tax on it. This incentive is very lucrative to bring people towards this organized sector,” Zahid said. “Since the prices have gone too high, it is difficult for an ordinary person to buy real estate. Through proper focus and awareness campaigns, the REIT can be a successful model in Pakistan. There is one REIT scheme listed on the stock exchange named Dolman’s Mall in Karachi. The ISE Towers REIT Management Company is in the listing process and a lot of REIT schemes are in the pipeline,” said the ISE Towers REIT Management Company chief.

Furthermore, before deliberating upon the role of REITs in more detail, it is important to know about the brief background of the ISE Towers REIT Management Company, said Zahid. “In the year 2016, a merger among the Islamabad Stock Exchange (ISE), Lahore Stock Exchange (LSE), and Karachi Stock Exchange (KSE) led to the formation of the Pakistan Stock Exchange (PSX). Then, the Islamabad Stock Exchange was converted into NBFC (Non-Banking Finance Company) with a license of REIT. The erstwhile ISE building was owned by its members. So, they decided to convert it into NBFC (Non-Banking Finance Company) under the REIT license, regulated by the Securities and Exchange Commission of Pakistan (SECP). Now, it is the ISE Towers REIT Management Company,” he added.

The growing population in Pakistan underlines the need for more homes and commercial areas. It is important for the government to support the REIT schemes under the protection of the Securities and Exchange Commission of Pakistan. It will make the investors more confident. The growth of this sector will generate a lot of revenue and employment opportunities. Performance-wise, the REIT is quite a safe system for investment. In the case of REIT schemes, the title of the project and the money go to the trustee/trustees. As public money is involved in this system, the SECP monitors it.

Credit: Independent News Pakistan-WealthPk