Source: Bloomberg

By Farhan Sharif

Pakistan, which issued rules for real estate investment trusts today, aims to attract as much as 20 billion rupees ($320 million) in 12 months by drawing investors to a property market where prices have tripled in three years.

“Pakistan’s growth story is just starting and real estate will be a very important part of this story,” Finance Minister Salman Shah said in an interview in Karachi today. “REITs are an instrument to bring real estate investment to the general investor.”

Pakistan is tapping the $764 billion global REIT market seven years after pioneer Japan, which was followed by South Korea, Singapore, Hong Kong, Taiwan and Malaysia. The government wants investors to be able to take advantage of rising property values in the $146 billion economy, which has expanded at an average annual 7.5 percent in the last four years.

“There should be a good response from investors given the amount of cash available and the interest of overseas investors in this region,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi. “The common man, who otherwise couldn’t participate in the real estate boom, will now be able to.”

The government said in the budget last June that owners will get a tax holiday till 2010 on the sale of property to a real estate investment trust. The REITS will be regulated by the Securities & Exchange Commission of Pakistan.

Pool Funds

Real estate trusts pool funds to buy properties and distribute rental income among investors. Pakistan’s REITs will be required to distribute 90 percent of profits.

Pakistan’s property prices have tripled in the last three years, according to the Association of Builders and Developers, spurred by record overseas remittances channeled into real estate by workers in the Middle East and the U.S.

Demand for new houses is estimated at 500,000 units a year, according to the government. Investment in real estate has been led by companies like Emaar Properties PJSC, the largest Middle East property developer.

REITs are to be introduced in the three biggest cities of Karachi, Lahore and Islamabad.

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Tags: finance minister, property markets, real estate investments