6 real estate investment trusts worth Rs38bn expected this year

Published July 21, 2021
REITs collect money from investors and deploy it in real estate projects. — Photo courtesy Sana Agboatwala/File
REITs collect money from investors and deploy it in real estate projects. — Photo courtesy Sana Agboatwala/File

KARACHI: After six years of radio silence from over half a dozen companies with a licence to manage real estate investment trusts (REITs), as many as six transactions worth up to Rs38 billion are likely to take place within 2021-22.

Speaking to Dawn in a recent interview, Arif Habib Dolmen REIT Management CEO Muhammad Ejaz said his company will soon launch four REITs in addition to the two schemes that the company announced earlier this month.

REITs collect money from investors and deploy it in real estate projects. They operate like any other company but offer more transparency to investors as trustees control all assets and the entity must list on a stock exchange within three years. Small investors can then take exposure to an otherwise capital-intensive and illiquid real estate market by publicly trading REIT units just like ordinary shares.

Mr Ejaz’s REIT management company – which is a joint venture between Arif Habib Group and Dolmen Group with equal shareholding – created the country’s first REIT that securitised and sold Dolmen Mall Clifton and the adjoining Harbor Front building in a Rs22.2bn transaction back in 2015. The REIT sector remained dormant for the next six years as unfavourable changes in the tax and regulatory regimes discouraged investors, Mr Ejaz said.

Changes made by SBP, FBR and SECP hailed for bringing investors back

“Key changes by the State Bank of Pakistan, Federal Board of Revenue and the Securities and Exchange Commission of Pakistan played an important role in bringing investors back to REITs,” Mr Ejaz said.

With a fund size of Rs3bn, Arif Habib Dolmen REIT Management has recently launched Silk Islamic Development REIT in Surjani Town, a low-income area in the northern part of Karachi. The second scheme, to be launched under the name of Silk World Development REIT in the same area, will have a fund size of Rs5bn.

As for the other four schemes, the CEO said they will have a collective fund size of Rs30bn and be located in more than one city.

Transaction structure

The REIT management company led by Mr Ejaz is one of the five equal shareholders in Silk Islamic Development REIT. Other investors include Yunus Brothers, Arif Habib Group, Liberty Group and Fatima Group.

As its trustee, the Central Depository Company (CDC) is currently holding Rs3bn in an account on behalf of the five shareholders. The REIT management company will use this money to purchase the 60-acre piece of land from a group of sellers led by Silkbank.

According to Mr Ejaz, land sellers will get a partial payment upfront and receive the rest of dues from the proceeds of the project. “The deferred payment arrangement has made the project more viable,” he said.

Noting that the project design details have not been finalised, Mr Ejaz said the scheme will likely have 12,000 two- and three-bed-plus-lounge residential units. “I can’t give you any price range right now. Construction costs are too volatile,” he said, adding that the scheme will start selling flats in 16 to 18 months. Allottees will get possession within four years of the project launch, he added.

“We’re building flats for middle-class families with household incomes ranging from Rs80,000 to Rs250,000… those who stretch themselves and buy a Corolla are middle-class people,” he said when asked what he meant by the middle class.

The second REIT scheme, to be located on an 86-acre piece of land, has only one shareholder: World Group owned by Mehmood Trunkwala. This scheme will have 1,500 villas and an equal number of apartments in addition to 600 low-cost residential units to be sold under the Naya Pakistan Housing Programme.

Both REITs will have to go public within three years. Sponsors will offer at least 25 per cent of their shareholding to the general public through a listing. Alternatively, the existing shareholders can issue new units or shares to raise fresh cash for project needs.

Published in Dawn, July 21st, 2021

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.