According to the SECP, the Commission has introduced changes to the regulatory regime for real estate investment trusts for promoting investment in real estate through capital market.
The regulatory framework for REITs was introduced in 2008. In 2010 and 2015, the framework was revised whereby some of the requirements such as capital of REIT management company (RMC), size of REIT scheme and units to be held by a single investor were relaxed, to encourage launch of REIT schemes. In spite of these improvements, only one REIT scheme was launched because, among other factors, the requirements for setting up a REIT scheme were considered stringent by the industry.
New amendments have been proposed on the basis of feedback and suggestions received from all the stakeholders, including RMCs, Mutual Funds Association of Pakistan, Central Depository Company, lawyers and valuers.
The amendments, among other things, envisage greater autonomy for the RMCs, enriched role of trustees, segregation of documentary requirements for developmental and rental REITs, permission to borrow against REIT assets, acquisition of commercially viable properties and permission to raise funds from investors before acquisition of property.
Further, a regulatory framework has been provided for disclosure of value of target property and basis of management fee to be charged to an REIT scheme. An RMC will have to refund money to IPO investors if property is not acquired within the specified time. The proposed amendments address all major concerns of the industry and also provide safeguards to protect interests of investors.
The draft amendments have been placed on the SECP''s website for comments of the public as well as parties that are likely to be affected by the amendments. Views if any, received within 14 days of the publishing of the draft amendments will be given due consideration by the SECP.
Under the revised registration process for REIT scheme, the SECP has proposed an REIT Management Company (RMC) shall submit documents to the Commission for registration of an REIT scheme including application along with copy of the registered trust deed containing information as provided in Schedule I; an affidavit stating that no funds or investments whatsoever have been received from any person on account of the proposed REIT scheme; fee as per Schedule III; an undertaking that RMC shall comply with the requirements relating to identification, acquisition and transfer of real estate to an REIT scheme as specified in these Regulations; latest audited balance sheet and profit and loss statement of the RMC, wherever applicable, or an auditor certificate verifying equity of the RMC; an undertaking that the RMC itself and the strategic investor(s) shall hold minimum number of units of REIT scheme till its winding up as specified in these Regulations; an affidavit by the Board of Directors of the RMC that they accept responsibility for all submissions to the Commission as being accurate; and any other document as may be required by the Commission.
The Commission may, if satisfied, register the REIT scheme with or without any conditions.
Acceptance of any document, information, valuation or projection or any approvals or any permissions granted based on such documents, information, valuation or projection shall not be construed as an endorsement by the Commission of the accuracy of such document, information, valuation or projection, the SECP added.
An RMC shall be entitled to a management fee which shall be clearly stated in the offering document along with the basis and quantum of fee to be charged to an REIT scheme and certificate from the auditor of REIT scheme confirming the management fee has been charged in accordance with offering document, the SECP added.