Types of REITs
There are different types of REITs in Pakistan. The scheme investing in an already-developed commercial or residential project to earn rental income is known as a Rental REIT, while the scheme investing in land to develop it for industrial, commercial, or residential use is called a Development REIT. A REIT could also be a combination of both, and such a scheme is called a Hybrid REIT.
REITs are regulated under REIT Regulations, which were last modified by the Securities and Exchange Commission of Pakistan (SECP) in 2022. The companies that wish to offer such a product seek an RMC license from SECP. In the next stage, any project conceived requires the commission’s consent and appointment of a trustee.
REIT provides ordinary investors the opportunity to get exposure to premium real estate projects without the need to purchase them entirely since it has to be listed on the stock exchange within three years of financial close (when all investment and financing arrangements have been made). This is a novelty in an otherwise capital-intensive property sector.
Similarly, the land or building has to be transferred in the trustee’s name within three months of the financial close, which brings about a high degree of transparency. Moreover, REIT schemes are required to engage independent auditors, valuers, lawyers, and accountants, which ensures multiple layers of control.
