Development of a Real Estate Investment Trust (REIT) for Mixed-Use Residential, Commercial, and Office Spaces
Abstract
The Dresden Developmental Real Estate Investment Trust (REIT) project evaluates the feasibility of establishing a mixed-use REIT in Karachi, Pakistan. The aim of this Experiential Learning Project (ELP) is to assess the financial viability, market demand, regulatory compliance, and risk factors associated with launching a REIT in Pakistan’s rapidly growing urban environment. The focus of the Dresden REIT is on residential, commercial, and office spaces in a prime location in Karachi, responding to the increasing demand for integrated urban developments. The primary objective of the Dresden REIT Project is to provide a comprehensive financial model and investment case, which includes detailed projections of revenue streams, such as the sale of residential units and rental income from commercial and office spaces. The project also evaluates the regulatory environment governing REITs in Pakistan, especially the recently updated SECP REIT Regulations 2022, to ensure compliance and identify any potential barriers to successful operation. Additionally, the project aims to highlight key risk factors in the development process, such as market volatility, regulatory changes, and construction delays, and provide strategies for risk mitigation. A mixed-methods research design was employed to achieve these objectives. Primary data was collected through interviews with industry professionals, surveys of potential investors, and focus groups to assess market demand and investor preferences. Secondary data was sourced from industry reports, regulatory documents, and financial statements of existing REITs in Pakistan, including Dolmen City REIT and Globe Residency REIT. The financial model used techniques such as Discounted Cash Flow (DCF), Internal Rate of Return (IRR), and Net Present Value (NPV) to evaluate the project's feasibility. The results of the analysis indicate strong potential for high returns from the Dresden REIT, with a projected IRR of 21.05%, signaling a profitable investment opportunity. The market demand analysis indicates robust interest in both residential and commercial spaces, particularly given the location proximity to major business districts and transportation hubs in Karachi. Investor surveys reveal a clear preference for high returns, regulatory transparency, and Shariah-compliant investment options, all of which are key features of the Dresden REIT. The report also identifies key risks, including potential market fluctuations, regulatory uncertainty, and construction challenges, and outlines mitigation strategies such as phased development, conservative debt structuring, and adherence to SECP’s regulatory framework
