ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) is considering amending the new REIT Regulatory Framework within one month of its approval in a bid to further encourage the real estate sector.

The framework was approved early this month, but now the SECP aims to remove the limits placed on holding of units of REITs by a single investor as it was being considered a hurdle for admission of large-scale REIT projects.

The SECP initially notified the Real Estate Investment Trust Regulations in 2008, and the parameters of REIT schemes were specified to encourage developmental REIT and large-sized rental REIT schemes.

However, it was noticed that property prices have been rising at a higher rate, and landowners did not have any financial incentive to liquidate real estate assets, and they showed lack of interest in setting up a REIT scheme.

“The previous regulatory framework also had some inherent issues that did not induce sufficient interest for entrepreneurs to enter the REIT management business,” SECP Chairman Zafar Hijazi told Dawn, adding, “Various steps were taken to make the regulatory framework attractive as per the local environment.”

Among the key changes made in the REIT Regulatory Framework was lowering of entry barrier, and the capital requirement for a company to start REIT management now is Rs50 million compared to Rs200m in the REIT 2008 regulations.

Under the new regulations, the fund size has been proposed to be aligned with listing regulations as the REIT fund will be listed on the stock exchange and it has been left to the discretion of fund manager as to what should be the optimum size of the REIT scheme.

A provision for strategic investor has been created, enabling REIT Management Company (RMC) to arrange investment anchors in its place.

The limit of use of customer advances by a REIT scheme has been increased to 70 percent. The new regulations also allow establishment of REITs in cities other than provincial and federal capitals.

Published in Dawn March 7th , 2015

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