SECP permits Modaraba firms to engage in real estate transactions.

SECP permits Modaraba firms to engage in real estate transactions.

ISLAMABAD: Modaraba businesses now have permission to work on real estate projects that have the approval of development authorities thanks to a decision by Pakistan's Securities and Exchange Commission (SECP).

A Modaraba business is permitted to engage with, hold, or trade in real estate projects, according to previously agreed-upon terms and circumstances, under SECP SRO 1546 (I)/2022, which was released on Wednesday.

A multipurpose Modaraba that invests in real estate accounts for one-third of its total assets must abide by the following rules:

I The investments should be backed by NOCs pertaining to the real estate project from the competent authority and should only be made in assets recognised by development agencies, such as Capital Development Authority and/or any other in any city of Pakistan.

(ii) Investments may be made with the intention of developing real estate for rental, for development, or for mixed projects.

A specific-purpose Modaraba must additionally abide by the following extra requirements if it invests in real estate or has at least one-third of its portfolio made up of real estate investments:

I The company's directors must each have a minimum of two directors with five years of expertise managing real estate projects.

(ii) An impartial valuer's valuation report must be received.

(iii) The company's prospectus must include information about the sponsors' management experience, the type of real estate project, potential project locations, investment objectives, valuation report, feasibility study, legal status of the property, funds required, sponsors' contribution, and compliance with the lock in period requirement for the sponsors.