Pakistan’s first Shariah Compliant REITs obtain certificate from SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued Pakistan’s first-ever Shariah compliance certificates to two Real Estate Investment Trusts (REITs); Signature Residency REIT and Rahat Residency REIT.

Earlier this year, SECP had issued the “Guidelines for Offering Islamic Financial Services 2023”, in response to a directive from Pakistan’s Federal Shariah Court (FSC), urging the government to promote interest-free lending practices.

These guidelines were designed to assist conventional financial institutions in transitioning into Shariah-compliant business models. The latest move comes in wake of these new guidelines, reported The Business Recorder.

The Signature Residency REIT, boasting an Rs. 825 million fund size and an indicative life span of four years, operates as a closed-end developmental REIT. Its objective revolves around constructing apartments and retail units on designated land, thereby generating revenue for investors through the sale of these units to potential customers.

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The Rahat Residency REIT is also a closed-end Shariah-compliant developmental REIT, characterized by a fund size of Rs. 1,650 million and an estimated operational life span of five years.

In both instances, investors will participate in a Shirkat ul Aqad partnership within the REIT structure, enabling them to acquire real estate and execute contracts for construction, financing, sale, and redemption in strict adherence to Shariah Advisor guidelines.

This move marks a significant stride towards bridging the gap between the real estate sector and Islamic financial markets. It provides conscientious Shariah-oriented investors with a regulated and transparent avenue for investment, aligning with their ethical and financial considerations.