Alhuda CIBE - Presentation on RIETs Prospects in Asia

1. 1
Presentation
to
IslamicFinancialMarketsConference
&
SpecializedWorkshops
by
ZaighamMahmoodRizvi
Chairman
&MD
H.B.F.C.
IslamicREITs/REIFsprospectsinAsia
Session4-January24.2007atMarriotHotel,Karachi,PAKISTAN.

2. 2
3
I-REIT:Isthenameright?
•i-REITInternetREIT
•i-REITIndiaREIT
•i-REITIslamicREIT
OR
•REIFRealEstate
IslamicFunds
4
Evolution
•ARealEstateInvestmentTrustorREIT(rēt,rhymes
withtreat)isataxdesignationforacorporation
investinginrealestatethatreducesoreliminates
corporateincometaxes.
•TheREITstructurewasdesignedtoprovideasimilar
structureforinvestmentinrealestateasmutualfunds
provideforinvestmentinstocks.
•REITsoriginatedinUnitedStatesin1960.Theywere
createdbyUSCongresstomakeinvestmentsinlarge-
scale,income-generatingrealestateaccessibleto
smallinvestors.TheCongressenvisagedREITsas
entitiessimilartopubliclimitedcompanies.
Cont..

3. 3
5
Evolution
•USA
–CongressenactedREITLawin1960.
–180listedcompanies.
–$400Bn+MarketCap
•Canada
–MutualFundTrusts(MFT)wereestablishedin1994inCananda.
–In2004,Canadahad24publiclytradedREITswithtotalMarket
CapitalizationofaroundUS$12.8Bn.Mosttheseweretypicallymore
highlygearedthansimilarvehiclesinAustralia&USA.
•Thereareapproximately200publiclytradedREITsintheU.S.today
January2007),withassetstotalingmorethan$475billion.Theshares
ofthesecompaniesaretradedonmajorstockexchanges,whichsets
themapartfromtraditionalrealestate.OtherREITsmaybepublicly-
registeredbutnon-exchangetradedorprivatecompanies.
Approximately800REITsarenotregisteredwiththeSECandarenot
tradedonastockexchange.6
BroadCategoriesofREITS
Liabilityside
•EquityREITs(ER):Theseownandoperateincome-producingrealestate
andtheirrevenuescomefromtherentchargedontheirproperties&Capital
gainsonsale.
•MortgageREITs(MR):Dealininvestmentandownershipofproperty
mortgages.TheseREITSloanmoneytoownersofrealestate,orinvestin
(purchase)existingmortgagesorMBS.Theinterestonmoneydirectlylent
toreal-estateownersispartoftheirrevenues.
•HybridREITs:Thesenotonlyoperatepropertiesbutalsolendtoreal-estate
ownersandoperators,thuscombiningtheinvestmentstrategiesofthe
above2types
Assetsside
•ResidentialREITs
•CommercialREITs
•HybridREITs

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7
AdvantagesofREITS
•REITsprovideInvestorswiththefollowingadvantages:
oAvoidanceofdoubletaxation
(nocorporateincometax,allowingpassthroughofincometoindividuals).
oProfessionalmanagementteamsresponsiblefortheday-to-dayoperations
oUnlikedirectrealestate,publiclytradedREITsarealiquidasset.
oRelativelysmallinvestorsareabletodiversifytheirholdingsbetweenvarious
geographicareasandpropertyspecializations.
oREITscantapthedebtandequitymarketstoraisefundswhenopportunitiesarise
oREITshavehadlowcorrelationtostocksandbondsprovidingportfoliodiversification
benefits
oHighcashdividendscanlimitsteepdeclines.
oReductioninDiscountstoNAVeliminatingthetaxoverhangfromsharevaluations
oAboveAll
Anopportunitytolawinlowincomepeopleandsmallsaverstohedgeagainstreal
estateinflation.Ifyoucannotaffordtoownaplot/house,atleastyouownafractionof
it.
8
InvestorsofREITs
•RealEstateInvestmentTrusts(REITs)areanefficientwayformany
investorstoinvestincommercialandresidentialrealestate
businesses.Asaninvestment,REITscombinethebestfeaturesof
realestateandstocks.Theygiveaninvestorapracticaland
effectivemeanstoincludeprofessionally-managedrealestateina
diversifiedinvestmentportfolio.
•TheREITindustrybeganitsfifthdecadein2000.Becauseofthe
industry'soverallmaturityandperformanceoverthelastfour
decades,REITscanbeviewedas"all-weather"investments.
•Thousandsofsmallinvestors/savers
•Institutionalinvestors–pensionfunds,endorsementfunds,
insurancecompanies,ProvidentFunds&Mutualfunds
•GlobalInvestors

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9
REITSpecificsdepend
onspecificREITLawsofeachcountry
ForacompanytoqualifyasaREIT,itmustmeetthefollowingcriteriain
US:
–TobeacorporateentityregisteredasREITunderREITslaws
–BeManagedbyaBoardofDirectors/Trustees
–Havesharesthatarefullytransferable
–Haveaminimumof100shareholders
–Payannuallyatleast90percentofitstaxableincomeintheform
ofshareholderdividends
–Havenomorethan50percentofitssharesheldbyfiveorfewer
individualsduringthelasthalfofthetaxableyear
–Atleast75%oftotalinvestmentassetsmustbeinrealestate
–Deriveatleast75percentofitsgrossincomefromrentsfrom
realestatepropertyorinterestonmortgagesonrealproperty
–Nomorethan20%ofitsassetsconsistofstocksintaxableREIT
subsidiaries
10
TypesofAssetsAttracting
REITsInvestment
•REITsinvestinavarietyofpropertytypes:shoppingcenters,
apartments,warehouses,officebuildings,hotelsandothers.
MostREITsspecializeinonepropertytypeonly,suchas
shoppingmalls,self-storagefacilitiesorfactoryoutletstores.
•HealthcareREITsspecializeinhealthcarefacilities,including
acutecare,rehabilitationandpsychiatrichospitals,medical
officebuildings,nursinghomesandassistedlivingcenters.
•SomeREITsinvestthroughoutthecountryorincertainother
countries.Otherspecializesinoneregiononly,orevena
singlemetropolitanarea.

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DifferencesbetweenaREIT&
ConventionalReal-EstateCompany
•REITisacollectiveInvestmentschemewithabroad-
basedownership
•UnitsoftheREITschemelistedandtradedonthe
Stock-Exchange(thereforegreaterCorporate
GovernanceandLiquidityforInvestors)
•90%incomedistributedtoUnit-Holders
•TaxpassthroughVehicle
•REITsenableundertakingofverylarge-scale
constructionprojects.
12
VisualIllustration
REIT
Unitholders
REITAssets
(properties)
Trustee
REITManagement
Company
ManagementServices
Company
(maintenanceof
properties)
HoldingofUnitsDistributions
Actsofbehalf
OfunitholderManagementFee
ManagementServicesTrusteefees
Netproperty
Income(fromrentalorsale)
Ownershipof
assets

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GlobalSuccessofREITS
•Accordingtooneestimate,globalrealestatesecuritiesmarket
stoodat$733billionasatDecember2003
•Priorto1990,REITSwereoperationalinonly4developed
countriesbuttodaytheyarefunctionalinover17countries,andthe
numberissteadilyincreasing.
•REITShaveoutperformedintermofyield,mostothermajormarket
benchmarksoverthreedecadesandwithsignificantlylessvolatility.
•In2001,Standard&Poor’srecognizedtheevolutionandgrowthof
theREITindustryasamainstreaminvestmentbyaddingREITsto
itsmajorindexes,includingtheS&P500.
.
14
ComparisonofPerformanceofUSREITSector
withtheothermainUSequitymarketindices
1994-2004

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REITs’successinAsia(I)
•AccordingtoUBSWarburg,theAsianregionincludingJapanand
AustraliacontainapproximatelyUS$1.3Tnofinvestmentgrade
property,nearlythesameasthatinUS.
•InAsiaREITsarefunctionalinJapan,HongKong,Australia
,Singapore,TaiwanandMalaysia,HongKong,andcomingupIndia
&Pakistan.
•AustraliaisthesecondlargestplayerofREITs,nexttoUSA.
•InAustralia75%ofShoppingPlazasareheldbyREITs.About50
REITs(knownasListedPropertyTrustsLPT)inAustraliaare
registeredwiththeAustralianStockExchangewithatotalmarket
capitalizationofaroundUS$60Bn.
16
REITs’successinAsia(II)
•TheAsianREITmarketintermsofgrowthisdominatedbyJapan,which
alonehas32J-REITswithamarketcapitalizationof$29.5Billion.By
comparisonittooktheUnitedStates34yearstoreach$30billionin
marketcapitalization.
•AlthoughmuchprogresshasbeenmadeinJapan,HongKong,Singapore
andSouth-Korea,considerableliquidityandtransparencyrisksstillexist.
•SingaporeasofDecember2004had4listedREITswithamarket
capitalizationofapproximatelyUS$3Bn.HongKongontheotherhas50
PropertycompanieslistedintheStockExchangewithmarketcapitalization
reaching$75Bn.The‘Link’REITlaunchedbytheHong-KongHousing
Authorityhasattractedanastonishingamountofinvestorinterest.
•MuchgreaterriskexistsinIndiaandChinaduetohighuncertaintyin
politicalandregulatoryenvironment.Itisfurtherexacerbatedbyshort
commercialleasesandvolatilerentalrates
Overthenext10years,AsianREITSareexpected
toincreasemanytimesinsizetonearly$900BN.

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USAREITsRETURNS
18
AverageAnnual
REITDividend
4.06%(Dec31st-2006)USA
4.2%Taiwan
4.2%Japan
4.9%HongKong
5.4%Singapore
6.3%NorthAsia
6.8%Thailand
8.1%SouthKorea
Yield(%)p.a.Country
Source:AsiaREITsInvestmentBoom

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REITsinAsia
3.8–4.50.1881TAIWAN
6-70.556KOREA
7-80.091MALAYSIA
4.1–5.15.7676SINGAPORE
3.5-419.9320JAPAN
Yield
%p.a.
MarketCap
(billionof
U.S.$)
TrustCountry
Source:HGI,NikkoCitiGroup,Bloomberg.DataasofJuly2005.
Potential
GrowthofREITsin
AsianCountries

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REITsinAustralia
•ListedPropertyTrust(LPT),werecreatedin1971.
•AustraliaisthetrendsetterforoneofthematuredlistedRealEstate
IndustriesthusdominatesintheWorld;
•Duetostableassociationoflistedpropertytrust(LPTs)withitsREITnot
onlytheownershipisstrongbutadeepinvestorpollavailable,hencethe
marketavenuestoLPTsarevibrant;
•Nearly10%oftheAustralianstockmarketcapitalizationisgeneratedbyits
LPTsascomparedwithUSwhereonly1%ofthestockmarketisproduced
throughLPTs;
•AftermeetingtheREIT’srequirementsofitscountry,thehorizonof
AustralianREITshasfurtherbeenextendedtotheothercountriesofthe
WorldwhichisglaringofthefacthowsuccessfultheAustralianREITsare;
•Theseareover800,000investorsinAustralianLPTSectorofover50LPTs,
withmarketcapitalofUS$50Bn.
22
AustralianCompanies
intheFTSEEPRA/NAREITGlobalRealEstateIndex
(RankedbyfreefloatadjustedequitymarketcapinmillionsofU.S.dollars)
431.3100431.3BWPBunningsWarehousePropertyTrust
443.5100443.5FKPFKPPropertyGroup
506.6100506.6VPGValadPropertyGroup
664.4100664.4GSAGalileoShoppingAmericaTrust
692.1100692.1MPRMacquarieProLogisTrust
766.9100766.9MDTMacquarieDDRTrust
1,008.601001,008.60IOFINGOfficeFund
537.1501,074.20ALZAustralandPropertyGroup
1,273.401001,273.40IIFINGIndustrialFund
1,494.501001,494.50CPACommonwealthPropertyOfficeFund
1,645.001001,645.00MOFMacquarieOfficeTrust
1,666.301001,666.30MCWMacquarieCountryWideTrust
1,449.10751,932.20MXGMultiplexGroup
2,254.601002,254.60IPGInvestaPropertyGroup
2,468.901002,468.90MGRMirvacGroup
1,972.50752,630.00GANCFSGandelRetailTrust
2,872.001002,872.00DRTDBRREEFTrust
3,263.801003,263.80CNPCentroPropertiesGroup
4,308.901004,308.90MGPMacquarieGoodmanPropertyTrust
5,633.801005,633.80SGPStocklandPropertyGroup
5,847.101005,847.10GPTGeneralPropertyTrust
$22,962.70100$22,962.70WDCWestfieldGroup
AdjustedMarketCap
FreeFloat
RangeEquityMarketCapTickerAustralianCompany

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REITsinAustralia–A-REITs
•ThemajorchunkoftheAustralianREITsisgenerated
throughemployer’scontributionof9%ofwagesto
workersasapartofemployer’ssuperannuation
retirementplanwhichaloneconstitutedUS$500billion;
•TheAustralianLPTrepresents10%oftheWorldlisted
propertycompanies;
•Thereare54varioustypeofLPTsfunctioningin
Australiawhichdeals-inIndustries,Offices,
Hotels/Leisure,retailetc;
24
REITsinAustralia
SalientfeaturesoftheAustralianLPTREITs
–Noborrowinglimits;
–Attrustlevel,theLPTistax-free;
–IncomeTaxonlyondistributionatunit-holder
level;
–Mostpropertiesarevaluedatleastannually;

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REITsinHongKong
HK-REITs
–SecuritiesandFuturesCommissionofHongKong(SFC)
promulgatedREIT’srulesinAugust,2003;
–ThereisonlyoneauthorizedREITofHK$23Billionlinked
withtheHousingAuthorityofHongKongforcarparks
andretailproperties;
–MajorpartofREIT’sincomeisgeneratedfromrentals;
–90%ofannualnetincomeaftersubscriptingincometaxis
distributedtoshareholdersindividends,andanyrelated
partytransactions,subjecttoshareholderapproval;
–Withover50listedpropertycompaniesinASX,
ofmarketCapA$75Bn.26
REITsinJapan
J-REITs
•TheJapan’srevisedInvestmentTrustLawwasintroducedin
November,2000;
•Up-tillAugust,2005,therewere21REITsfunctioningatJapanwith
totalassetsworthamountingtoUS$20billion.FivemoreREITsare
expectedby2006.
•AllJapaneseREITsareintheprocessofgrowththusactivelyinvolved
inpurchasingtheproperties;
•JapaneseREITsaretreatedastaxexemptentitiesiftheypaydividends
equaltoatleast90%oftheirprofittoinvestors;
•Yieldadvantage2-4%aboveJapaneseGovtBonds.

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KoreaREITs
K-REITs
•TheKoreanLegislationforREITSwaspromulgatedin2001;
•AlthoughtheREITsinAsiafocusesupontheactivitiestaken
placeinJapan,SingaporeandeveninHongKongyettheKorean
REITsectorisviableforitsowncountry;
•MinimumcapitalwasKoreanWonKRW50billionforbothregular
REITsandCreditREITs;
•AsperrevisedREITlaw(REICA),theminimumcapital
requirementisnowKRW(KoreanCurrency)25billion.Itallows
50%ofinvestment-in-kind;
•KoreanREITsareinvolvedintheacquisition,managementand
saleofproperty,aswellasrenovation,realestatedevelopment(
Upto30%ofequity)andpropertyleasing;
28
MalaysiaREITs
M-REITs
•TheMalaysianExchangehasthreelistedREfirms
IN1989-90.
•In2005AxisREITlauncheditsfirstREIT.Its
propertyportfolioconsistoffive
industrial/commercialandofficebuildings,valuedat
US$79million;

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MalaysiaREITs
M-REITs
•ForlistedREITs,atleast75%oftotalassetsmustbe
investedinRealEstate;
•Forun-listedREITs,atleast70%ofassetsinvested
mustbeinreal-estate,single-purposecompaniesorreal
estaterelatedassets.
•MalaysianREITshaveaborrowinglimitof35%ofthe
netassetvalueofthefund
30
Singapore(S-REITs)
•Introducedin2002,theSingaporepossesses
themostprogressiveREITmarketsinAsia;
•SingaporeREITshavegrownto6REITswith
US$5.6billionmarketcapitalization.
•However,theyieldreducedsignificantlyfrom
7.26%to4.7%%injusttwoyearsinJune,2005
withthepremiumtobondsnarrowingfrom498
basispointsto213basispoints

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Singapore(S-REITs)
•TheRegulatorforSingaporeREITsistheMonetary
AuthorityofSingapore;
•CapitaLandGroupisoneofthelargestlistedproperty
companiesinAsia,withintentionaloperationsin28
countriesand90citieswithanequitymarket
capitalizationjustunderUS$4.5billion;
•Theprivaterealestatefundplanstoacquireanddevelop
assetsworthUS$500millionovernextsevenyears;
32
Taiwan(T-REIT)
•TherealstatesecuritizationLaw(RESL)inactiveinJuly
2003permittedestablishmentofclosed-endfund,
althoughsettingofopen-endfunds,stillrequires
regularityapprovals
•REITshavenomaximumleveragelimit.
•ThereisonlyonelistedREITlaunchedinMarch-2005
withasizeof5.83billion(Taiwanesedollars);

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IndiaLiberalizesREITLaws
•NameofREITslawinIndiaenactedarecalledRealEstateMutualFund
(REMF)
•Underthenewrequirementsfordevelopment,servicedplotsforintegrated
townshipshavebeenreducedfrom100acresand2,000dwellingunitsto
25acres.Also,aconstructiondevelopmentprojecthasaminimumbuilt-up
areaof50,000squaremeters.
•InApril,2004theGovernmentofIndialiftedtheembargoonventurecapital
fundsinvestingintherealestate;
•Asaresultofthischange,Indianandinternationalfundsarestartingto
investinthepropertysector.
•ThenewFDIguidelinesareexpectedtotriggerasurgeofforeign
investmentintotheconstructionsector,perhapsasmuchas$1.5billionin
thenextyearandatanincreasingpaceafterthat.
•Thisinflowofcapitalwillhelpfinancehousing,officebuildings,retailstores,
researchanddevelopmentfacilities,hotels,resorts,technologyparksand
othercommercialrealestateprojects.34
SurgeofInvestmentin
IndianRealEstateSector
•Positiveimpactwaswitnessedsoonaftertheliberalization.
•ANewYorkbasedTishmanSpeyerPropertiesL.Pshoweditsinterestin
creatingajointventurewithICICIVentureFundsManagementCompanyof
India(ICICIVentures),India’slargestprivateequityfirm;
•ThroughthisventureeachcompanyissupposedtocontributeUS$300
millionforeventualinvestmentinresidential,officeandretaildevelopment
inthelargestcitiesofIndia;
•TheHousingDevelopmentFinanceCorporationLtd.(HDFC),India'slargest
housingfinancelender,issettingupHDFCVentureCapitalLtd.,capitalized
at$111million;andICICIVenturesislaunchinga$222millionfund.GE
CommercialFinanceRealEstatehasalreadyinvested$63millioninafund
launchedbySingapore-basedREITAscendas,whichhasbeenpresentin
Indiaforthepast10yearsengagedindevelopmentandleasingof
technologyparks.
•Thefundplanstoacquireanddevelopassetsworth$500millionoverthe
nextsevenyears.

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IndiaREITs(I-REITs)
•FDI,inIndiawasinitiallyavailableonlyforfoursectors
i.e.hospitality,technologyparks,integratedtownships(or
mixed-usedevelopment),andspecialeconomiczones
thehorizonhasbeenexpandedtorealestatesectorsfor
developingintegratedtownships;
•Investorsarerequiredtodevelopaminimumof100
contiguousacreswithatleast2,000dwellingunits;
•Byobservingthetremendousavenuesinrealestate
marketsbothinnational/internationalcontext,theIndian
Governmentannouncedaliberalizedguidelinesfor
allowinggreaterFDIinFebruary,2005;
36
IndiaREITs(I-REITs)
•Byvirtueofthisfordevelopment,servicesplotsforintegrated
townshipshavebeenreducedfrom100acreand2,000dwelling
unitsto25acres.Alsoaconstructiondevelopmentprojectwitha
minimumbuilt-upareaof50,000squaremeters;
•InApril,2004theGovernmentofIndialiftedtheembargoabout
venturecapitalfundsinvestinginrealestate;
•AsaresultofFDIguidelinessurgeofUS$1.5billionforecasted
inthenextyearandatanincreasingpaceafterwardwhichwill
helpfacilitateforhousing,officebuildings,retailstoresresearch
anddevelopmentfacilities,hotels,resorts,technologyparksand
othercommercialrealestateprojects;

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IndiaREITs(I-REITs)
•ImmediatelyafterannouncementofFDIthepositiveresultsbecame
apparentandaNewYorkbasedTishmanSpeyerPropertiesL.Pshowits
interestincreatingajointventurewithICICIVentureFundsManagement
CompanyofIndia(ICICIVentures)theIndia’slargestprivateequityfirm;
•ThroughthisventureeachcompanysupposedtocontributeUS$300million
foreventualinvestmentinresidential,officeandretaildevelopmentinthe
largestcitiesofIndia;
•TheHDFCissettingupHDFCventurecapitalLtd.,capitalizedatUS$111
millionandICICVenturesislaunchingaUS$222millionfund;
•GECommercialFinanceRealEstatehasalreadyinvestedUS$63millionin
afundlaunchedbySingapore-basedREITAscendas,whichhasbeen
presentedinIndiaforthepast0yearsengagedindevelopmentandleasing
oftechnologyparks.
38
RealEstateBoominMiddle-EastCont..
•Middle-EastisanotherregionwhereREITscanlookforwardtoavery
promisingfuture.
•Saudia-Arabia,theholiestofIslamicCountrieshasrecentlyopenedits
stock-marketstoforeignerswhileDubaihasrecentlyintroducedREITs
Laws,Rules&Regulations.
•DubaiisforthefirsttimeofferingtheRightofResidentialOwnershipalong
withRightofResidencetoForeigners.
•ThemassiveOil-PricesIncreaseintherecentpasthasimprovedBalance
ofPaymentsLiquiditybyapproximatelyUS$300-500Bnpaintheregion
•Thesesurplusesunlikeinthepastarenowbeingrecycledinthe
local/regionaleconomyratherthanUS&EU

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RealEstateBoominMiddle-East
•Theoil-pricesincreasethistimeislikelytoberelativelypermanentthanin
earlierepisodes1973-74or1979-81
•FinancialWorldisflattening&helpingintegrationofIslamicFinancewith
globalsystems.Islamicgovernmentsarefullysupportingthismovetowards
IslamicEconomicsasRegulators,CentralBankers,Issuers&Asset
Managers.
•IslamicFinanceisgrowingat15-20%pacomparedto4-6pafor
ConventionalfinanceintheMERegion
•MovestowardsFinancial&EconomicintegrationintheMEregion;GCC
MonetaryUnionin2010.
•EmphasisonInfrastructureDevelopment:estimatedvalueofProjectsunder
developmentorplanningexceedsUS$1Trillion.
40
REITsAssociations
oNationalAssociationofREITs(NARIET)-USbased
oEuropeanPublicRealEstateAssociation(EPRA)-
Europe
oAssociationofForeignInvestorsinRealestate
(AFIRE)-Europe
oAsianPublicRealEstateAssociation(APREA)-Asia

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REITsAssociations
•US&EuropehavepowerfulorganizationsrepresentinginterestsofListed
RealEstatesectorinexistenceforalongtime.
•APREAisfullyendorsedbyEPRA,NARIET,AFIREandhasbeenoffereda
greatdealofsupportbyTheMonetaryAuthorityofSingapore.
•APREA’simpressivelistoffoundingmembersincludeamongstothers
HongKongLand,West-fieldGroup,SMPrime,AyalaLandInc.,ARAAsset
Managers,AscendasREIT,MacquarieGroup,YTLCorporationBerhad,
HendersonGlobalInvestors,UBSRealityIncorporated.
•APREAworkwithitsmemberstowards:
Raisingstandardsandawarenessintheareasof
accounting,reporting,valuation,
Lobbyingwithgovernmentsforenactingpractical
regulations,viablestructuresandtaxharmonization
ProvisionandimpartingofEducation&Training
42
IslamicREITsinMalaysia-II

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43
InvestinginIslamicREITs-Issues
(I)
•Highdistributionsofannualprofitandlower
reinvestmentleadstoaslowergrowthrate
•Althoughthebusinesstendstobeafairlystableone,
REITsarenotwithoutrisk.Forexample,their
dividendpaymentsarenotguaranteedandthereal
estatemarketispronetocyclicaldownturns
•ThelackofadevelopedsecondarymarketforIslamic
instrumentsincludingREITs
•Shari’ahrestrictionsmightrestrictinvestmentuniverse
•UniversalIslamicREITsguidanceandregulatory
Frameworkdoesnotexist
(Contd..)
44
InvestinginIslamicREITs-Issues
(II)
•IslamicREIThasapotentialtodevelop
intoviableinvestmentalternative,
however,followingmajorissuesneedsto
beresolved:
Universallyacceptableregulatoryframework
Shari’aconsensusonassetstypes
Crossbordertrading
Taxbenefitsanddoubletaxtreaties

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45
REITsProgressinPakistan
•REIT-stylestructureexistedintheformofRealEstateModarabase.g.Twin
TowersModarabawhichwasaBusinessFailure
•December2004:FirstDraftofproposedREITLawspreparedbySecurities
&ExchangeCommissionofPakistan(SECP)andpresentedtotheGOP
•September2006:SECPpresentstheseconddraftofProposedREITLaws
totheGOP
•ATask-ForcecreatedunderthechairmanshipofDr.SalmanShah,PM’s
advisoronFinancetocomeupwithanInvestorFriendlyREITModelafter
consideringthebasicLegal,RegulatoryandFiscalissues.
46
REITsProgressinPakistan
•GOPhopestoattractbothDomesticandForeignHighNet-WorthInvestorsafter
REITlawsarefinallypromulgated.
•GOPisactuallyhopefulof$3billionFDIinReal-Estate
•SECPplanstointroduceBuild-Own-TransferREITSinitially,whereREITSare
dissolvedoncetheprojectiscompletedandsold.SECPplanstointroduceRental
REITSinthesecondphaseoftheplanonceBuild-Own-TransferREITSare
stabilized.

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47
ProposedREITsByHBFC
1,250-1600165–225Total
Office/
Residential
250-30050–759,000Hayatabad,Peshawar
Residential750-100075-10010,000ModelTown,Lahore.
OfficeComplex.250-30040-501,556MauveArea,Islamabad
TypeConstruction
CostEst.(Rs)
MarketValue
ofPlot(Rs)
Size
(SqYard)
Plots
(RupeesinMillion)
•REITsstructuretobeadvisedbythefinancialconsultantbasedonvariousparameters.
•itmaybeequityorleveragedREITs.
•structuremaybeeitherResidential,CommercialorHybrid.
•NESPAKisworkingastechnicalconsultant.
•GovernmentiskeentoseefloatationofREITsforgrowthofrealestateindustry.
HBFCtoexecuteitsprojectsbasedonREITmodeoffinance.
48
Thankyou
http://www.hbfc.com.pk
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