Pakistan to See First REIT in Years on Khan’s Construction Push

(Bloomberg) -- Pakistan is set for its first real estate investment trust in more than six years as Prime Minister Imran Khan seeks to stimulate the economy through a construction boom.

Arif Habib Dolmen REIT Management Pvt. plans to raise 8 billion rupees ($51 million) via private placements in two REITs for a housing project in Karachi, Muhammad Ejaz, the firm's chief executive officer, said in an interview Tuesday. It plans to purchase the land in about two months, partly from Silkbank Ltd., he said.

Arif Habib Dolmen had created Pakistan's only REIT in 2015 and the industry, which had gone silent since then, is reviving now on Khan's incentives and regulatory changes. Pakistan is willing to forgive tax evaders if they invest in construction projects, while banks have been asked to increase their outstanding mortgages by at least 5% by December.

One of the new REITs will focus on villas and the other on apartment buildings and commercial developments. This is a developmental REIT with an expected internal rate of return of more than 30%, according to Ejaz. The older REIT, which holds rental assets including Karachi's most prominent mall and an office tower, offers a dividend yield of around 12% a year, he said.

Pakistan has been revising rules to make REITs more attractive for investors and developers. Finance Minister Shaukat Tarin in his budget this month lowered the dividend payment tax on REITs to 15% from 25%.

“The government has chosen the right sector for growth,” Ejaz said.

Silk Islamic Development REIT is scheduled to be launched next week for the commercial and apartment building section. Its five equal shareholders are Yunus Brothers Group that owns Lucky Cement Ltd., Fatima Group, Arif Habib Corp., Liberty Group and Arif Habib Dolmen. The second Silk World Development REIT includes real estate developer World Group, which will develop the villas.