The Securities and Exchange Commission of Pakistan (SECP) has approved a proposal for launching the first ever ‘Real Estate Investment Trust (REIT)’ Scheme in Pakistan.

Arif Habib REIT Management Company Limited will manage the REIT. With the advent of REIT Schemes in the Pakistan the capital market enters into a new era where it will figure prominently among regional markets. REITs are a recognized investment vehicle in many developed countries like USA, UK, Australia, Malaysia, Japan, etc.

Mutual funds, modarabas, corporates, banks and other investors will have access to a new asset class (REIT Units), which will enable them to diversify investments and manage risks. The assets of the REIT Scheme will be maintained in the name of the Trustee and its affairs will be managed by a licensed REIT Management Company.  The SECP has approved draft trust deed, business plan and conditional valuation report of the scheme. Earlier, the SECP had approved real estate , name and trustee of the REIT scheme.  In other development, SECP has drawn up a roadmap to review the operational performance and financial result over the years viz a viz the projections given in the prospectus of companies. The exercise is aimed-ensuring accountability sponsoring directors of the companies whose performance, in the years subsequent to listing, could not match the tall claims made in the prospectus.  

It may be noted that the requirements for disclosure of material, relevant and complete information at the time of issuance of prospectus is already very stringent in the Companies Ordinance, 1984 and relevant rules made thereunder. Any, omission and misstatement of material facts in prospectus attracts penal provisions under the Ordinance.

Prospectus serves as the key tool for prospective investors, particularly the general public, for raising capital from the capital markets. Companies raise substantial capital through public offer for purpose of financing their capital expenditure, aggressive expansion plans and business reengineering.

Therefore, companies clearly state the purpose, benefit and utilization of the capital raised from public subscription. Moreover, the forecast and projections made in the prospectus foretell the tale of a successful business model promising substantial profits and indicating attractive return in the form of dividend.

\  In certain cases, however, in the years subsequent to a successful public subscription, the operational and financial performances of the Company reveal losses and mismanagement, depriving investors from reasonable return on their investment.  The accountability of directors of the company for prudently managing the affairs of the Company and fulfillment of their statutory responsibility towards the shareholders is the key for assessing the performance of the Company.

Therefore, in addition to consistent examination of annual and interim accounts, the prospectus and allied information of listed companies are being examined and comparisons drawn with the current performance of such companies. SECP believes that transparency and accountability of companies shall further reinforce the confidence of stakeholders, ensure reasonable return to investors and strengthen capital market for attracting prospective investment.