KARACHI: The general public will be able to buy shares in Pakistan’s first developmental Real Estate Investment Trust (REIT) on Dec 14 and 15 ahead of its upcoming listing on the Pakistan Stock Exchange.

Javedan Corporation is selling 10 per cent “units” — a formal term used for shares in the case of REITs — in Globe Residency REIT, a wholly owned subsidiary, to ordinary investors at Rs10 apiece, the company said on Tuesday.

REITs are investment schemes that collect money from investors and deploy it in real estate projects. They must list on the stock exchange within three years of inception — a feature designed to let small investors take exposure to an otherwise capital-intensive and illiquid real estate market.

The project is based on a close-ended scheme with a life of 48 months. Proceeds will help the company build Globe Residency, an apartment project of 1,344 residential units in Naya Nazimabad located on the outskirts of Karachi.

While the general public is expected to buy 10pc shareholding in the REIT, shareholders of parent firm Javedan Corporation will subscribe to 85pc units at the same price. Real estate consultants will buy the remaining 5pc shareholding, according to Javedan Corporation Director Muhammad Ejaz.

Debt and equity will contribute Rs1.4 billion each to the REIT’s total size of Rs2.8bn, said Mr Ejaz, who’s also the CEO of Arif Habib Dolmen REIT Management Ltd, a sister company that’s going to launch as many as four REITs in the next few months.

REITs operate like any other company but offer a higher degree of transparency to investors because trustees — not developers — control all assets. After the first REIT-based transaction that securitised and sold Dolmen Mall Clifton and the adjoining Harbour Front building for Rs22.2bn in 2015, the REIT sector remained dormant for nearly six years.

REIT managers blamed the absence of transactions on unfavourable changes in the tax and regulatory regimes that discouraged investors from taking part in the specialised investment schemes.

But the State Bank of Pakistan, Federal Board of Revenue and the Securities and Exchange Commission of Pakistan stepped up a gear in the last year or so, making it attractive for investors, particularly banks, to put money in the real estate sector through REIT-based transactions.

Published in Dawn, December 7th, 2022