DUBAI/KARACHI (Reuters) - Real estate investment trusts (REIT) will help broaden investment in Pakistan from local and Gulf-based investors as the country struggles to promote itself as a growth market, Pakistan-based real estate executives said. Arif Habib, chief executive of Arif Habib Securities Ltd (AHSL), said much of Pakistan's current real estate development was small in nature and lacking in transparency - issues that keep investment at bay. "REITs will formalize the real estate sector and allow the general public to participate," Habib said in an interview with Reuters in Dubai. "It would also allow for foreign investors to come to Pakistan knowing that the investment would be closely regulated." Net foreign investment in Pakistan fell 28.4 percent to $745.8 million in the first four months of the fiscal year 2010/11 as a shaky security situation and a Taliban insurgency put off investors. A delegation from the Punjab visited the UAE this week to drum up financial investment from the oil-exporting Gulf Arab state, showcasing real estate as one potential growth market. But Pakistan's real estate sector has historically been plagued with accusations of corruption, and high-profile scandals in the sector. Property deals are often "off the books," and participants tend to be from among an elite few, Habib said. REITs would provide an opportunity to diversify the investor base in the sector through a regulated, tradeable investment. REITs have not been officially launched in Pakistan but Habib said his Arif Habib Group, the holding company for AHSL, had received approval for two of four applications it has filed with the Securities and Exchange Commission. Habib said one REIT, based in the port city of Karachi, is expected to launch by the first quarter of 2011. He said the four REITs together will amount to a $400 million investment scheme, available for local and foreign investment. Habib also signed a memorandum of understanding with the Punjab Board of Investment Trade in Dubai on Monday to set up a REIT in Punjab. The deal, if completed, would be worth $80 million. Habib said he expects his company's REITs to largely focus on social and low-cost housing to accomodate the vast population in Pakistan. Long-term returns over 3 to 7 years are seen above 30 percent, he said. While investors of Pakistani REITs may benefit from entering into documented real estate deals with "white money sources" that offer competitive returns, govt incentives also make the trusts an appealing proposition for developers, said Mohammad Aamir, head of business development at AKD REIT Management Company Ltd. Aamir said fiscal incentives allow for transactions to be tax-free for a seller and if a REIT distributes 90 percent of its profits, it did have to pay income tax or withholding tax. AKD REIT, along with Arif Habib Group, were granted permission to become Pakistan's first real estate management companies last year.