Master of Business Administration Executive
Faculty / School
Faculty of Business Administration (FBA)
Year of Award
MBA Executive Research Project
This project aims to predict the success of a new product; Real Estate Investment Trust ‘REIT’ in the capital markets of Pakistan by gauging the investment perception associated with investing in REITs and studying the present regulatory framework promulgated by Securities & Exchange Commission of Pakistan for this financial product.
For the purpose of this research, a sample of 50 individuals was surveyed to gauge their perception about REIT, real estate market and investment associated risks and returns. In light of this feedback together with the study on the present REIT regulatory framework in Pakistan, the conclusion is formed for this research.
The results of this research have shown that general public would be interested in investing in REIT via the stock market since majority of surveyed believed in growth of real estate market and appreciation in real estate prices in future. However; the regulatory framework would need to revamp; to provide level playing field to all stakeholders and to provide major incentives for real estate owners and project developers to enter into REIT based financing structure.
Therefore to conclude, under present regulatory framework and real estate market dynamics it will be difficult to gauge interest of real estate developers and strategic investors to contemplate REIT as option to develop real estate or consider it as investment property. Hypothetically, if a REIT Scheme is offered for Initial Public Offering, it will be successful. This is because general public demands a better return on their investment, which also covers their downside risk to investment and they associate such characteristics with investing in real estate.
It seems that if all impediments to the launch and success of REIT scheme are addressed, this financial intermediation product can bring improvement in the contribution of construction sector in our GDP (currently 2.5%), overcoming housing shortage in the country (currently growing at a CAGR of 4.2%), and will pave the way for documenting a huge potential sector in our economy. Through better price discovery REIT can bring standardization and discourage speculative price volatility in the real estate sector. However, since there remains a big gap between the market values and assessed values of properties in real estate transactions, real estate developers, owners and project sponsors still favor the traditional method of funding their projects. It will require the regulators to revamp not only REIT Regulations but provide incentives to all stakeholders in Income Tax Ordinance, 2001 and Transfer of Property Act, 1882.
Rizvi, S. A. (2012). Market study for predicting success of REITs in the capital markets of Pakistan (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/research-projects-emba/494
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