Real Estate Investment Trusts- An OVERVIEW


The conceptual framework of Real Estate Investment Trust that was initially legislated by the US Congress in 1960 was finally recognized and adopted by Pakistan in 2008 when the Securities and Exchange Commission of Pakistan formally presented the Real Estate Investment Trust Regulations, 2008 on 31st January 2008 which was subsequently replaced by Real Estate Investment Trust Regulations, 2015 on 16th April, 2015.

The REIT, as defined by Wikipedia, “is a company that owns, and in most cases operates, income-producing real estate.” The motive behind creation of REITs was to create a mechanism, based on mutual funds, whereby the benefits associated with real estate and stock based investments were combined in such a way that helps create an opportunity, especially for small investors to access income producing real estate which was previously confined to wealthy individuals and large financial intermediaries only.

A US REIT Company is required to have at least 75% of its total assets in real estate and 75% of its gross income should come directly from real estate activities like rental income, interest on mortgage financing and sale of real estate. The REIT is also required to distribute a minimum of 90% of its annual taxable income to its shareholders in the shape of dividends. A minimum of 100 shareholders are required for a REIT, provided no more than 50% of its shares held by five or fewer individuals.

Consequent upon its legislation by US congress, the first US REIT was created in 1961 and the Americans responded to this form of investment in a positive manner. Today the US REIT Industry shows an equity market capitalization of more than $ 1 Trillion, representing $ 3 trillion in gross real estate assets .The success of REITs can also be gauged from the fact that an estimated 80 million Americans own REITs (invested in REITs) through their retirement and other investment funds. Generally, investment in REITs is for dividend rather than for growth/capital gains. Some REITs in US pay the dividend on monthly basis to attract passive income seekers. The all REITs average annual return in US is 9.72 % (2017: 9.27%).

In Pakistan a REIT Management company (RMC) falls under the category of Non-Banking Finance Company and requires a license to this effect from SECP. So far only one REIT is listed on the Karachi Stock Exchange which is claimed to be the first listed REIT in south Asia.

As against US REITs which are broadly classified into Equity REITs and Mortgage REITs, here in Pakistan the REITs are divided into two types i.e., development REITs schemes for construction of properties and the rental REITs schemes for renting out completed properties. Under the revised REIT regulations 2015, the Paid-up capital requirement for RMC has been reduced from Rs.200 million to Rs.50 million and the minimum stake of RMC in a RET has also been reduced from 20% to 5%. Besides allowing a performance fee for REIT managers, a new concept of strategic investor has also been introduced who is entitled to a 20% stake in the REIT scheme. So far as the matter regarding dividends is concerned, it was left at the discretion of the RMC to device dividend policy in the best interest of the unit holders.


As per information available on Dolmen City REIT official web site:

Dolmen City REIT is Pakistan’s first REIT scheme. It is a Closed-ended, Listed, Rated, Perpetual,Shariah-compliant, Rental REIT scheme which offers investors to become Unit holders of two component of the Dolmen City project, Dolmen Mall Clifton and The Harbor Front. The properties will generate rental income that will be distributed by the REIT Scheme among unit holders in the shape of dividends. Any possible appreciation in the value of the property will be an added benefit. Dolmen Mall Clifton has a total built-up area of approximately 1 million square feet spread over three levels. Anchored by Hyperstar and Debenhams, Dolmen Mall Clifton has a strong mix of local and international brands including Mango, Next, Nike, Nine West, Timberland and Charles & Keith. With 130 retail outlets, a multi-level department store, and a food court that accommodates 1,200 customers, Dolmen Mall Clifton is the largest shopping mall in Pakistan, currently operating over 90% occupancy rate. The Harbour Front is an office complex home to leading local and multinational corporations of the country. The complex offers prime office space across seventeen floors, spread over 270,000 square feet. The building is currently 100% occupied with the current tenant portfolio comprising of companies including Engro, Phillip Morris Mitsubishi and Procter & Gamble, among others.

  • NAV (March 2018)                      PKR 18.44 per units
  • Dividend Yield
  •    Quarter Ended (Mar. 2018)                          3.00%
  •    Annualized (2018)                                        12.00%
  •  Unit Price (Current on PSX)   PKR 12.99

Despite all these impressive and healthy numbers of a single RMC, what significant contributions can we expect from REITs to solve the ever increasing housing shortage in Pakistan?

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