Sunday, November 21, 2010

The New Real Estate Investment Trust Rules

Real Estate Investment trust (REIT) is a form of security listed on the stock exchange. They allow people to invest in major real estate projects. It was in 2008 that the Securities and Exchange Commission of Pakistan (SECP)issues regulations that enabled the formation of Real Estate Investment Trusts. in 2010, the SECP has issued modifications to those regulations to conform to the current market situation.
The new modifications include the following:
1) The minimum funding that has to be generated through a Real Estate Investment Trust has been reduced from five to two billion rupees.
2) the capital investment requirement from a Real Estate Investment Trust management Company (RMC) has been reduced from 500 to 200 million rupees.
3) A REIT may now develop and rent out a property ; earlier only development for sale purposes was permitted.
4) The RMC may now charge fees on a quarterly rather then an annual basis. The fees are based on the one percent of profit  the REIT earns from the sale of a project, or two percent from the REIT rental yield.
5) A single REIT may manage a single property by developing it for sale or renting it, or a mix of both.
These modifications have been made in order to offer flexibility and encourage small investors to form RMC's and launch Real Estate Investment Trusts, thereby making real estate investment a viable option. The first REIT is anticipated to become operational in 2011.
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1 comment:

  1. Thanks for sharing. When it comes to real estate, paying attention to the market trend and environment is also a good idea.