Developer Imarat is embarking on what would be Pakistan’s largest Shariah compliant real estate investment trust (REIT) in pursuit of alternate long-term financing for its property projects, CEO Saad Khalid Awan shared with IFN Investor.
Imarat seeks a stable costing level as Pakistan’s central bank policy rate had swung drastically over the past decade – rising from 5.75% in 2016 to over 13% in 2019, plunging to 7% in 2020 to offset the global pandemic effects before surging to 22% in June 2023 amid inflationary pressures.
While the policy rate was down to 15% as of the 4th November 2024 and projected to be reduced further, Imarat will continue with the REIT plan – which was announced in a year earlier and received the Securities and Exchange Commission of Pakistan’s (SECP) approval in May 2024.
“Plans for the REIT are being finalized and we hope to open it for public subscription in early 2025.” Saad declined to provide further details like pricing or REIT target size, but confirmed that one of Imarat’s completed properties will be in the initial REIT offer.
Anticipating the REIT return to investors will be significantly lower than prevailing bank financing rates, Saad pointed out that the SECP is also actively promoting REITs since June 2021 as a capital market structure with attractive benefits.
Among these include a lower tax rate of 15% compared to the regular 29% applicable to corporates – a concession that is extended to SPVs imbued with properties that will come under the REIT purview. The SPV also simplifies the REIT documentation for legal titles, in line with global practices.
“Having the REIT gives Imarat more options for which financing deal works out better, either through the capital market or with direct bank financing.”
Saad revealed Imarat plans to inject all its 15 projects into the REIT scheme, with total value of projects being around PKR70 billion (US$252 million).
“Since our intention is to go big, we are already planning to launch at least two to three REITS in the near future. And eventually, have all of our projects structured into REITs to raise a profile of our company as a major REIT operator in Pakistan.”
Currently, 19 REIT licenses been issued in Pakistan with registered assets of over PKR280 billion (US$1.8 billion). Two REIT schemes already listed on the Pakistan Stock Exchange have an aggregate market capitalization of over PKR32 billion (US$115 million).
