Real estate projects: SECP allows Modaraba companies to deal or trade

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has allowed Modaraba companies to deal or trade in real estate projects recognised by development authorities like Karachi Development Authority.

According to SRO 1546 (I)/2022 issued by the SECP on Wednesday, a Modaraba company can hold, deal or trade in real estate projects, subject to the laid down conditions.

SECP amends Modaraba Regulations 2021

In case of a multipurpose Modaraba, where investment in real estate is up to one-third (1/3rd) of the total assets of the Modaraba, the Modaraba shall comply with the following conditions:

(i) The investments shall be made only in assets recognized by development authorities i.e. Karachi Development Authority, Capital Development Authority, Rawalpindi Development Authority, Lahore Development Authority and/or any other Development Authority in any city of Pakistan and should be accompanied by NOC relating to real estate project from the aforesaid authority.

(ii) The purpose of investment can be to develop properties for rental or development or mix (both rental and development) projects.

In case of a specific-purpose Modaraba for investment in real-estate or where investment in real estate is one-third (1/3rd) or more, of the total assets of the Modaraba, the Modaraba, in addition to conditions stipulated, shall also comply with some additional conditions:

(i) At least two directors of the Modaraba company shall have a minimum of five years of experience of dealing with the real estate projects.

(ii) A valuation report from the independent valuer shall be obtained.

(iii) The prospectus of the Modaraba company shall, contain information relating to the management experience of sponsors of the Modaraba company in the real estate business, the type of real estate project to be undertaken, potential locations of the real-estate, investment objectives, valuation report, feasibility study, the legal status of the property, funds required, sponsors contribution and the compliance with the lock in period requirement for the sponsors, the SECP added.

Copyright Business Recorder, 2022