News
SECP Proposes Major Easing of REIT Rules to Attract More Capital Into Pakistan's Real Estate Sector
By Mariam Khan
Real Estate Analyst
5 min read
The Securities and Exchange Commission of Pakistan has proposed amendments to the REIT Regulations, 2022, aimed specifically at promoting investment, expanding investor participation, and providing greater flexibility to REIT schemes. The proposals would reduce the minimum real estate income and asset threshold for REIT schemes from 75 percent to 65 percent, giving fund managers considerably more flexibility in structuring their portfolios while still maintaining a real estate focused mandate.
The Full Set of Changes Being Proposed
Investment based REITs would be permitted to invest in vacant land and plots, subject to applicable regulatory requirements, for at least one year. SECP also proposes allowing specified group level trusts and employee funds to invest in unlisted REIT schemes, broadening the potential investor base beyond what current rules allow. The maximum tenure for loans obtained from sponsors, directors, and related entities would be extended from 24 months to 36 months, while existing unitholder approval requirements for such borrowing would remain in place. Rental and investment based REITs could receive up to one additional year to complete their listing in justified cases where delays arise from circumstances beyond the REIT Management Company's control. The amendments would separately simplify procedures for REITs to acquire property from government entities and development authorities.
Why This Follows a Genuinely Recent Prior Revision
This is not the first time SECP has revised these specific regulations in a short period, and that recent history is useful context for understanding this new proposal. SECP had already substantially revamped the REIT Regulations earlier this year, refining the definition of real estate to distinguish between its passive and active components and introducing income and asset test requirements explicitly aligned with international best practices, following an extensive stakeholder consultation process that included sessions in Karachi and virtual meetings with REIT Management Companies, trustees, banks, mutual funds, and law firms. That earlier revision is what set or reinforced the 75 percent threshold now being proposed for reduction, meaning SECP is actively continuing to adjust a framework it only recently finished recalibrating, rather than making a single, isolated change.
Why Reducing the Threshold Matters So Much
Lowering the minimum real estate income and asset requirement from 75 to 65 percent gives REIT Management Companies meaningfully more room to hold a broader mix of assets within a single scheme without falling out of compliance with the REIT structure's core requirements. This kind of flexibility can make it easier to structure schemes around mixed use developments or projects with a more varied income profile, potentially widening the range of real estate projects that can realistically be financed through a REIT vehicle.
Why the Vacant Land Provision Is Particularly Significant
Permitting investment based REITs to hold vacant land and plots directly addresses a segment of Pakistan's real estate market, plot based investment, that has historically sat outside formal REIT structures. Given that plot and land speculation represents a substantial share of how Pakistani investors have traditionally engaged with real estate, bringing this activity within a regulated REIT framework could channel some of that existing investor appetite into a more transparent, professionally managed structure, provided the applicable regulatory safeguards genuinely prevent the kind of purely speculative land holding the REIT structure is not intended to facilitate.
This Is Still a Proposal, Not a Final Rule
SECP has explicitly opened these amendments for public consultation rather than notifying them as final, binding regulations. Following SECP's own established pattern for REIT regulation changes, stakeholder feedback, including from REIT Management Companies, trustees, and other market participants, will likely be reviewed and potentially incorporated before any amendments are formally finalised and take effect.
What Remains Unconfirmed
No specific timeline for concluding this consultation period or notifying final amendments has been announced. Given SECP's own recent history of revising these regulations through a multi stage process involving published consultation papers and in-person stakeholder sessions, a comparable process should be expected here before these specific proposals become binding rules.
What This Means for Pakistan's REIT Market and Existing Schemes
These proposed changes could directly expand the scope of institutional investment reaching plots, vacant land, rental property, and larger development projects, relevant context for any existing or prospective REIT scheme operating in Pakistan, including the recently oversubscribed Naya Nazimabad Apartment REIT already covered by milkiyat.com. A more flexible regulatory framework, if finalised broadly along the lines proposed, could make it easier for future REIT schemes to structure around a wider range of real estate assets than the current 75 percent threshold and existing land restrictions have permitted.
What This Means for Investors and Developers
Investors interested in real estate backed investment vehicles should watch this consultation process closely, since a finalised reduction in the income and asset threshold, combined with permitted vacant land investment, would represent a genuinely more flexible REIT landscape than currently exists. Developers and REIT Management Companies with projects that previously may not have fit cleanly within the existing 75 percent threshold, particularly those involving land banking or vacant plot components, should monitor the consultation outcome directly with SECP, since these specific proposals could open a viable REIT structuring path for projects that could not have qualified under the current framework.