Pakistan’s Central Bank has amended prudential regulations in order to boost participation by banking sector in real estate investment funds (REITs).
The central bank said in a recent statement that in line with the government’s housing and construction sector development initiative, the State Bank of Pakistan has taken various regulatory measures to increase the participation of development banks / financial institutions by financing them in the development of these sectors.
The statement reads:
To further expand its activities in these sectors, SBP has amended some of the existing prudential regulations for commercial and corporate banking to encourage more active participation and investment by development banks / financial institutions in real estate investment funds
Real estate investment Trusts are Fund management companies that own income-generating real estate in different real estate sectors. These asset management companies raise funding from the public and organizations through the placement of various types of funds. Real estate investment funds invest money by investing in real estate and thereby promoting investment in the housing and construction sector to foster economic growth and development.
The shares of the listed REITs are traded at Pakistan stock exchange and offer investors various advantages.
Amendments in SBP regulations will allow banks / financial institutions to increase their REIT investment to 15% paid up capital, up from the current 10% capital cap. The said changes will not only bring more capital into the REIT, but it will also allow banks / financial development institutions to diversify the investment portfolio.
Moreover, SBP also eased restrictions in the current rules on seeking funding in exchange for shares in the group’s listed companies. This will allow investors to increase liquidity for more investment in new business opportunities and projects leading to increased economic activity.
The regulatory change will support the capital market by encouraging corporate sponsors to consider listing on exchanges. It will also improve economic documentation, transparency and good corporate governance practices.
The changes have been made in order to support the Real Estate Sector which is the prime focus of the government. At present there are no housing REITs and government want to support the nascent REIT market.
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