TPL REITS, a promising opportunity for real-estate investors

Real Estate Investment Trusts (REITs) are investment schemes that allow investors to invest in real estate assets and that aims to distribute dividends from rental income and/or capital gains of unit sales to its unitholders.

TPL REIT is undertaking three mega projects where it shall own, develop or finance income-generating properties in one of the adjacent-posh localities of Karachi.

Project A: First of a kind technology park in Pakistan, with high end IT infrastructure to be designed for world-class technology companies, accompanied with a 42 Key business Hotel

Project B: Master planned community including mid-rise residential apartment towers, retail space, offices and hospitality asset located at waterfront, to be equipped with quality infrastructure

Project C: Pakistan’s one of a kind premium-end residential apartment tower and showrooms with world class amenities, located in the prominent locality

REITs in Pakistan offer numerous benefits in terms of fund raising for real estate projects through a regulated business model. This includes enhanced transparency, availability of finance for development/ refurbishment of property, fund raising from public through IPO, in addition to conventional financing alternatives. The REITs sector has been given tax incentives in relation to Capital Gains Tax on transfer of property to a REIT Scheme. Moreover, no tax is applicable on the income of the REIT Scheme if it distributes 90% of its income; and dividend received from the REIT Scheme is taxed at 15%.

National Bank of Pakistan has joined the club of unitholders as an Institutional Investor in TPL REIT which is contemplating to raise 500 million dollars in the next 2 to 3 years.  60% of the 500 million dollars is to be raised through foreign investors, whereas the 30% of the same is targeted to be raised from local investors.

Foreign investors are expecting around 22%- dollar-denominated return as a target IRR. Furthermore, TPL RMC set up an offshore Cayman fund to accommodate foreign investors through a feeder fund structure, which will be managed by an ADGM incorporated fund manager. This structure is created to bring foreign investment into Pakistan.

The Scheme-33 of Karachi has recently seen an inundation of large-scale movement and jolts in prices of real-estate – an increase of 3-10 times in the last 3-6 years. An Independent Research carried out by the Inside Financial Markets suggests that the price of one-acre land in phase-1 of Noori Abad has gone-up by 10-12 times to 37 million from just 3 million in last five years Similar price surges have been observed in some areas of Bahria, Karachi as well. Judicial crackdown on the builders and illicit construction is undergoing over the properties in scheme 33, 45, and distant areas from Karachi.

TPL REIT presents a promising opportunity for investors and people alike who are considering real estate as a lucrative investment avenue. Securing over 40-acre land within Karachi is formidable and astute, as one of the planned prospective investments. However, only time can tell, whether TPL REIT would be able to reach its target returns, which are expected to be above benchmarks, and allow it to win the confidence of local and foreign institutions.

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