Pakistan to see its first Sharia-compliant REIT soon

As the incumbent government is working to incentivize the construction sector of Pakistan, Pakistan is going to see its first real estate investment trust (REIT) in over six years.

According to the recent report, the Arif Habib Dolmen REIT Management Private's CEO Muhammad Ejaz said that the firm plans to raise Rs8 billion via private placement in two REITs for a housing project in Karachi.

According to the Securities and Exchange Commission of Pakistan (SECP), this will be the country's first Shariah-compliant development REIT under the REIT regulatory framework.

It is worth mentioning that Arif Habib Dolmen REIT Management was launched in 2015, but has been silent for a long time, and now the firm has entered into a partnership with leading business groups for entering into an arrangement with a commercial bank, enabling the launch of the Shariahcompliant developmental REIT Scheme called the Silk Islamic Development REIT (SIDR).

The mentioned leading business groups entering into partnership are Yunus Brothers Group, Fatima Group, Arif Habib Corp, Liberty Group, and Arif Habib Dolmen. This development comes as Imran Khan's government is offering incentives and regulatory changes to favor the country's real estate sector.

The government is willing to forgive tax evaders if they invest in construction projects, while the banking sector has been asked to increase their outstanding mortgages by at least 5% by December. To further attract investment into the real estate sector, the government in the recent budget has also lowered the dividend payment tax, going down from 25 percent to 15 percent.

Among the two REITs, one will be focusing on villas, while the other on apartment buildings and commercial developments, Bloomberg reported. The SIDR would be reportedly bringing investment to the underdeveloped land in Karachi, to cause upward social mobility for the area.

According to the CEO, this is a developmental REIT with an expected internal rate of return of more than 30%, according to Ejaz. The older REIT, which holds rental assets including Karachi's most prominent mall and an office tower, offers a dividend yield of around 12% a year, he said.

It is worth mentioning that reportedly, following the projects' registration and the approval for issuance of units, the REIT scheme can raise funds via offering the units to investors for acquisition and development of the respective project.

International media agency said that the Silk Islamic Development REIT is scheduled to be launched next week for the commercial and apartment building section.