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Tag: REITs

  • Removal of sunset clauses on CGT exemptions for real estate sector demanded

    Removal of sunset clauses on CGT exemptions for real estate sector demanded

    KARACHI: Pakistan Stock Exchange (PSX) has pointed out that at present timelines for exemption from Capital Gain Tax (CGT) are discouraging long-term investors from entering the Real Estate Sector.

    Moreover, different Real Estate Investment Trust (REIT) categorization have created distortion and excluded commercial and mixed-use REIT projects, the PSX highlighted the issue in its proposals for the upcoming budget 2021/2022.

    It further said that higher rate of tax on dividends as compared to mutual funds (enhanced through Finance Act 2019, rate of tax on dividend from REITs Schemes was enhanced from 15 percent to 25 percent.

    Sale of real estate to a REIT scheme at market value is a paper transaction required to transfer title of real estate in the name of trustee.

    Furthermore, REIT Scheme is exempt from income tax when 90% income is distributed as dividend and therefore advance tax cannot be adjusted.

    The PSX proposed exemption from CGT provided in clause 99A, Part 1, 2nd schedule of Income Tax Ordinance, 2001 should be applied to all categories of REITs (mix-use projects)

    – Remove sunset clauses

    • June 2023 for Developmental REIT Scheme and Rental REIT Scheme.

    — Rate of tax on dividend, which is 25% at present, be synchronized with mutual funds15 percent [First schedule, Part-1, Division-Ill, paragraph B]

    — Exempt advance tax on property transfers to/from a REIT Scheme u/s 236C & 236K.

    Giving rational to the proposals, the PSX said it will promote documented real-estate will attract more investments particularly by companies with disclosure of actual prices and income. Revenue impact will be positive as it will generate indirect and additional revenues from allied businesses.

  • SBP amends regulations to encourage investment in REITs

    SBP amends regulations to encourage investment in REITs

    KARACHI: State Bank of Pakistan (SBP) on Monday amended prudential regulations to encourage enhanced participation and investment of banks and development financial institutions in the Real Estate Investment Trusts (REITs).

    The SBP in a statement said that in line with the government initiative for the development of housing and construction sector, the State Bank of Pakistan (SBP) has been taking various regulatory steps to enhance banks/DFIs participation through their financing in the development of these sectors.

    In order to boost activities in these sectors further, the SBP has now made changes to certain provisions of existing Prudential Regulations for Corporate & Commercial Banking to encourage enhanced participation and investment of banks/DFIs in the REITs.

    REITs are asset management companies that own or finance income-producing real estate across a range of property sectors. These asset management companies raise funding from general public and institutions by floating various kinds of funds. REITs deploy funds by investing in real estate properties thereby enhancing the investment in housing and construction sector to contribute in economic growth and development.

    The units of listed REITs, are tradable on stock exchanges and offer a number of benefits to investors.

    The changes in SBP regulations would enable banks/DFIs to make higher investments in REITs to the tune of 15 percent of their equity as against existing limit of 10 percent of equity. This move will not only bring more capital towards REITs but would also enable banks/DFIs to diversify their investments.

    In addition, SBP has also relaxed restriction, in existing regulations, on seeking financing against shares of listed group companies. It will enable investors in raising liquidity for further investment in new business opportunities and ventures leading to greater economic activity.

    The change in regulation would also benefit the capital market by encouraging sponsors of companies to consider listing on the stock exchanges.

    This will promote documentation of the economy, transparency, and good corporate governance practices as well.