Lahore-The State Bank of Pakistan has issued a circular today, announcing favorable changes in the Basel Capital Adequacy framework for Real Estate Investment Trusts ‘REITs’. The changes will allow banks to book greater exposure in REITs, facilitate the development of Housing Finance as well as Capital Market in the country.
REIT Management companies in Pakistan submitted their recommendation to the State Bank of Pakistan earlier this year. It is a positive development that now, Banks’ investment in REITs will now require them to set aside less capital against risk emanating from this investment activity. Moreover their investment in REITs shall now be categorized in the “Banking Book” instead of “Trading Book”.
REITs are a quintessential instrument for the government to achieve documentation, transparency and promoting real estate development in the country. Effective participation by banking companies will support this structure and provide confidence to the market.
The REIT Management Companies are thankful to the SBP and consider this as an important milestone towards the development of REIT industry in Pakistan.
BPRD Circular Letter No. 18 of 2021
