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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Tuesday notified major amendments to the Real Estate Investment Trusts (REIT) regulations with the aim of allowing infrastructure development.
A major change made in REIT regulations is the introduction of a new Public-Private Partnership (P3) model. The revised framework has made clear segregation between conventional and infrastructure categories. Non-P3 REIT is for conventional projects while P3 REIT is for infrastructure projects under the public-private partnership model.
The amendments have relaxed laws related to real estate developments and promote investment through REIT companies. So far, Dolmen City, Karachi is the only functional REIT project in the country out of the10 licences issued in the past two years.
The SECP has also proposed to the Federal Board of Revenue (FBR) that the tax on dividends of REIT share be reduced from 25 per cent to 15pc, which was also the tax rate for dividends of mutual funds.
The SECP has also requested the FBR to extend the exemptions on capital gains tax on property transferred to REIT scheme up to 2023, the exemption is set to expire this year.
SECP Chairman Aamir Khan told Dawn that the REIT sector has significant potential to contribute to the growing housing and infrastructure needs of the country.
“All impediments faced by bona fide potential issuers and the sector have been removed in the amendments and the sector will hopefully witness growth in the coming financial year,” Mr Khan said.
The amendments have been made to make the REIT concept successful in the country and the flaws noted in the past two years have been addressed in the amendments.
A senior official of the SECP said that it was noted that the informal sector was very flexible in terms of valuation of the property, investment climate and taxations while the REIT companies were not able to compete with them.
After the amendments the SECP has withdrawn the powers to evaluate the value of property, and the ownership documents the said property does not require to be transferred to the REIT company and it can remain in the name of the investor.
REIT Management Companies (RMCs) are allowed pursue developmental, rental or hybrid options under both these classifications.