KARACHI: In a bid to boost the housing and construction sector, the State Bank of Pakistan has reformed regulations for banks and financial institutions to promote real estate investment trusts (REITs).
A statement released by the central bank read; “In order to further boost activities in these sectors, the SBP has now made changes to certain provisions of existing Prudential Regulations for Corporate & Commercial Banking to encourage enhanced participation and investment of banks/DFIs in the REITs.”
Any company that owns, operates, or finances income-generating real estate by pooling the capital of numerous investors is defined as a real estate investment trust (REIT). Under this, every individual investor earns dividends from real estate investments as per the sum they invested – without having to buy, manage, or finance any properties themselves.
As per the new regulations, by increasing the limit from 10%, the banks/DFI can now invest up to 15% of their equity in the REITs, helping both parties to diversify their investments and generate more capital.
This move is aimed at ensuring transparency through documentation and promotion of revenue generation and good corporate governance practices that will boost the economy.
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