The Securities and Exchange Commission of Pakistan (SECP) has granted the country’s first Shariah compliance certificate to two Estate Investment Trusts (REITs), Signature Residency REIT and Rahat Residency REIT.
First Shariah compliance certificate
Earlier this year, the SECP released Guidelines for Offering Islamic Financial Services 2023 in response to a Federal Shariah Court (FSC).
Judgement in Pakistan, in which the FSC required the government to allow all lending activity within an interest-free basis.
These rules make it easier for traditional financial institutions to transition to Shariah-compliant business models.
Following the publication of the rules, a number of enterprises have applied for certification as Shariah-compliant businesses.
The Signature Residency REIT is a close-end developmental REIT with a fund size of Rs. 825M and an expected life of four years.
It intends to develop property and create flats and retail units, creating revenue for investors through the sale of these properties to customers.
Rahat Residency REIT, on the other hand, is a closed-end Shariah-compliant developing REIT with a fund size of Rs. 1,650 million and an estimated life of 5 years.
In compliance with Shariah Advisor principles, investors will form a Shirkat ul Aqad partnership under REIT to acquire real estate and execute contracts for development, financing, sale, and redemption.
The granting of Shariah compliance certificates to REIT developments represents an important step.
Towards linking the real estate industry with Islamic financial markets and giving Shariah-conscious investors with a regulated, transparent investment option.
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