Real Estate Investment Trusts (REITs) are investment companies that manage, own, or finance income-generating real estate. Individual investors get dividends without owning, managing, or financing any property. Investing in real estate through REITs is similar to investing in stocks through mutual funds. These companies offer several benefits, such as liquidity, diversification, transparency, and stable cash flows. REITs also offer opportunities to small and middle-scale investors to invest in real estate as it minimises risk and does not come with a huge barrier to entry in terms of capital. These investment trusts don’t develop properties for selling purposes but buy and develop properties to operate them as part of their investment portfolio.
Pakistan is experiencing a real estate boom due to increasing housing demand. Following the housing demand, this new real estate asset class has created much hype in the investor market. Ten (10) new REIT Schemes have been launched in the country in the past two years, showing huge growth potential. As per regulation, these companies were only allowed to invest in real estate, real estate-related, and non-real estate assets.
In Pakistan, there are different types of REITs, including:
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Rental REIT – these trusts invest in residential or commercial properties to generate rental income.
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Developmental REITs – invest in the construction or refurbishment of residential, commercial or industrial properties.
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Hybrid REIT – this type of REIT may include a mixed portfolio of rental and development properties.
However, this investment model is new in Pakistan and needs proper management quality to get fully established.
For this purpose, the Securities and Exchange Commission of Pakistan (SECP) has proposed several amendments to REIT’s regulatory framework. The main objective of these proposed amendments is to introduce new REIT products, create ease for REIT Management Companies in launching different REIT schemes, and shift toward a reporting-based regime.
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