Arif Habib’s Ambitious REITs Pipeline: Up to 5 Listings

Real estate business in Pakistan has been the foundation of wealth creation that has driven a large number of domestic investors and overseas investors. Nevertheless, without clarity, regulation and ease of access to the industry by the small and medium investors, the sector has been short of being transparent, regulated and opened to the general investors.

It is here that such game changers as Real Estate Investment Trusts (REITS) have come up. The formation of such REITs in the recent years has started transforming the dimensions of real estate investment in Pakistan an informal transparent and liquid form of investment in properties. The Arif Habib Group with its name, the Arif Habib, is one of the leaders of the changes in the Pakistan financial markets.

Arif Habib Limited being the asset management company and the lead developer in its real estate sector has already demonstrated its REIT leadership by having successfully launched Real Estate Investment Vehicles such as Dolmen City REIT, the first listed REIT in Pakistan and this has become a benchmark in the REIT industry in the country. Today, having achieved a pronounced and thorough development of the REIT market, Arif Habib plans to introduce an ambitious roll-out of up to five new REITs listings. All these planned REITs will be targeting to exploit different areas in real estate such as residential, commercial, mixed-use and industrial premises.

The pipeline is not only an indicator of the corporate strategy of Arif Habib but also the coming of age of the real estate and capital market industry in Pakistan. Launching several REITs, the group hopes to democratize property investment, allowing people and institutional investors to invest in income-generating properties with fractional stake.

Here in this blog, we shall examine the importance of the REIT projects pioneered by Arif Habib, how it can play a vital role in the reformed Pakistani real estate sector, and why this mega pipeline is being regarded as a milestone in the Pakistani financial markets. We shall also take into consideration the barriers, as well as the opportunities, that await it and why these REITs have enormous potential to both local and foreign investors.

The contribution of Arif Habib Group to REIT pioneering

The Arif Habib Group has ever been at the fore front in the ever evolving situation in Pakistan vis-a-vis the capital markets and financial services sector. Having intensively worked in the field of investment bank, asset management, brokerage, and real estate development over the decades, the group has never stopped pushing the boundaries of innovation and institutionalisation of financial instruments. In case of REITs, Arif Habib is considered one of the pioneering houses that brought this concept to the investors in Pakistan following the successful launch of Dolmen City REIT in 2015.

Dolmen City REIT is the mark of success not just by Arif Habib, but by the whole Pakistan real estate industry. It offered the investors access to a premier commercial and shopping center- Dolmen Mall Clifton and the surrounding office towers, in a completely transparent, regulated, and revenue generating structure listed on the Pakistan Stock Exchange (PSX). Its continual dividend distributions, good occupancy levels and price appreciation demonstrated that REITs were able to provide sustainable returns but at the same time, they passed well recognized international governance standards.

The Arif Habib Group has been encouraged by this success and is decided to continue its REIT strategy to the next level by coming up with a pipeline of five new REITs. Such REITs are set to target a wide variety of asset types, which include residential developments aimed at Pakistan growing middle class to high-end commercial and mixed-use projects meant to cater to the changing demands of the urban centers. This means that by having various types of property in these REITs, Arif Habib intends to come up with products that will attract large number of investors, including the most conservative who want to earn an income, to those who seek capital growth.

In addition, the fact that the group has expertise and experience in the financial and real estate business gives it an advantage. Arif Habib has the advantage of introducing well-perceived capital markets expertise to the game as opposed to traditional developers which are more inclined towards the construction aspect of the business and have no knowledge of the capital markets.

Since this is the case, Arif Habib ensures that each REIT is structured with the investor being taken care of, liquidity and long-term sustainability of the REIT being major factors of consideration. The anticipated REIT pipeline is projected to open up prospects to small investors who in the past were not able to afford direct ownership of properties but are now able to invest due to minimal investments to buy units in a professionally run trust.

The strategy of Arif Habib is consistent with the current trend emerging across the world of institutionalizing of real estate investments so that they are more transparent and accessible to the general population. The current and raising urbanization of the Pakistan economy and its population size means that there is raised demand in the form of well planned residential and commercial space and this presents an excellent situation one that can be exploited by these new REITs.

The Ambitious Pipeline of Five REIT Listings

The news that Arif Habib is planning to start up to five new REITs has created a great buzz both at the financial and real estate circles. All these planned REITs are geared towards a particular niche in the property market, both according to existing trends of this market as well as in terms of future potential. Although the fine details of all five REITs are not made available quite yet, it is rumored that the portfolio will consist of a blend with residential, commercial, mixed-use, and even infrastructure-based REITs.

Income-producing Residential REITs should enjoy a lot of attention particularly because there is a shortage of over 10 million units of shelter in Pakistan. With grouping of investments via REIT, Arif Habib will be able to build quality housing projects serving middle-income groups and enabling investors to get periodic rental income and the possibility of capital increase. These REITs may also ride on the positive results of the recently announced government schemes such as Roshan Apna Ghar, which has worked to persuade Non-Resident Pakistanis (NRPs) to invest in their homeland real estates on secured and digitalized platforms.

Commercial REITs alternatively will bank on the fact that the retail and office markets in Pakistan are growing very fast. Central cities such as Karachi, Lahore, and Islamabad have recorded an increasing trend of the demand of Grade-A office spaces and contemporary shopping complex constructions. As Arif Habib has worked on Dolmen Mall Clifton, which qualifies as one of the most successful, in terms of commercial real estate projects in Pakistan, this experience grants the group an advantage in terms of the likely new REITs in terms of structuring other such income generating commercial properties.

The pipeline may also include mixed-use REITs, with residential, retail and office components of the same trust providing diversification. This is becoming a trend in most parts of the world because of the integration of communities where people can not only stay, but also work and even shop in the same area which makes both the investors and tenants value creating.

Based on the proposed five listings, Arif Habib is indicating its intent of expanding the size of the REIT market in Pakistan which has remained small in comparison as compared to other new economies so far. Not only will every REIT be on the way to garner domestic equity, but it is also possible that they can attract foreign equity as well, especially on the part of NRPs and institutional investors who seek steady and long term yield in a controlled market.

Once it is effectively implemented, this pipeline will revolutionize the property sector in Pakistan by formalizing the investments, enhancing liquidity, and creating the new standards of quality and transparency. It would also increase the capacity of the capital markets since REITs are listed in the stock exchange thus making the investment trade in it easily by buying or selling the units.

Impact of Pakistan real estate market

The ambitions of Arif Habib as far as REIT pipeline are concerned will have a vast effect on the Pakistan real estate market. Conventionally, property investment in the country has been capricious, cash dominated and frequently produced with problems such as under valuation, lack of documentation and investor protection. The emergence of REITs, more so having been supported by a reputable brand such as that of Arif Habib, ushers a lot of needed institutionalization in the sector.

The elevated transparency is going to be one of the major effects of these REITs. Being investment instruments that should be managed according to the regulations, REITs must some financial records, perform frequent auditing, and provide the performance indicators. Such transparency does not only increase the trustworthiness of investors but also raises the bar on developers and real estate operators.

Besides, REIT model makes the accessibility of small investors more feasible. Real estate properties have always been high-end investment, which means to buy a property a lot of capital is needed. This is because with REITs, investors- even the small investor can get a piece of a high value real estate property and gets a share of the rental income and capital gains. This liberalization of property ownership has a potential of opening up a new retail investor base in Pakistan.

The five REITs pipeline will also generate positive ripple effect on the construction and allied industries. The development activities of these REITs will be on a large scale and create demand of basic construction materials and labor as well as other services and this will create employment and spur economic activity. This is exactly what the multiplier effect is and it is most beneficial to a nation such as Pakistan since construction sector is huge in Pakistan and constitutes major share of the GDP.

Possibility of price stabilization is also another major effect. Real estate speculation in recent years has caused an upswing in property prices and inability to afford homes by a large percentage of the population. The pipeline developed by Arif Habib can bring more proportion and sustainable growth into the property value since he is putting the investment into the structured REITs instead of investing in the land as a highly speculative business.

Moreover, such REITs have a high probability of being foreign financed or in other words, high potential of foreign investment, highly especially amongst the NRP who are turning towards obtaining secure, transparent and professionally administered real estate opportunities. This will make the listings extremely appealing to foreign investors who would like to get an exposure to the Pakistan property market over the long-term since the earlier REITs under Arif Habib Group have been quite successful, and this would lend them a lot of credibility.

Obstacle and Opportunities Beyond

Although the prospect of the REIT pipeline of Arif Habib looks extremely positive, there are issues to be approached to make all these projects successful and sustainable. Awareness constitutes one of the main problems. A lot of investors in Pakistan have not yet gotten acquainted with the mechanism of REITs, profitability of this kind of investments, and the differences between REITs and traditional investments in real estate. It will be important to educate the market by conducting awareness and investing seminars, and online outreach programs.

There is also regulatory obstacle that is still present. Though the SECP has achieved good results in the development of REIT framework, additional measures are required to facilitate approvals, eliminate bureaucracy, and to make developers interested to adopt the REIT scheme. The combination of the three elements, namely the private, regulatory, and policymakers, will be necessary to provide a conducive environment within which REITs can thrive.

As far as opportunity is concerned, it could not be better to list these REITs. It is highly populated in Pakistan, and its urban population is increasing at an alarming rate and requires well-structured housing and commercial facilities. As more people get involved in NRPs and more initiatives are being made such as Roshan Apna Ghar, there is a discernible need to have structured investments in the real estate field.

Technology integration is also another opportunity. The transparency, efficiency, and investor confidence can be provided by digital means, internet trade in REIT units, and blockchain-powered records stored in property documents. With the latest technologies that Arif Habib REITS can integrate in their operations, they are set to establish new standards and become more competitive and accessible. In addition, such REITs had the potential of leading to sectorial diversification out of real estates. As an illustration, a REIT-based on logistics and warehouses is gaining popularity in the global market and continues to grow due to the boom in e-commerce. The progressive mindset of Arif Habib may also have such innovation in its pipeline, as the world follows the same trend.

In the end, the success of this pipeline will depend on how successful it could bring returns and how it could meet the best governance standards. This is because should Arif Habib achieve the same success as Dolmen City REIT in a number of projects, it will further entrench into its reputation as being one of the leaders of the real estate and capital market in Pakistan.

Conclusion

Such an ambitious initiative of Arif Habib to list as many as five REIT includes a watershed moment in the real estate and financial markets of Pakistan. Basing on the success of Dolmen City REIT, the project outlines the vision that the process of real estate investment will be more structured, more transparent, and available to a greater audience of investors.

Not only are its several REITs geared towards different asset classes helping to cement the existence of its own group but it can assist in the general professionalization and increase in size of the Pakistan property market. The REITs can bring immense domestic and foreign investment in the country, boost the economy, and bring high standards of quality and transparency. Although some of the challenges like investor awareness and improvements on the regulatory fronts still exist, the opportunities definitely take the lead over risks.

To investors, local and foreign both, the REIT pipeline at Arif Habib provides an opportunity to be part of the real estate boom in Pakistan where they would be investing in professionally managed and income generating investments. To the larger economy this shift will mark the start of a new era when the real estate market will no longer be merely a speculative market but will become an official, regulated and very profitable asset class.

Once these five REITs get listed into the Pakistan Stock Exchange, property investment will not only be re-defined within the real estate sector but it will also motivate other developers and other financial institutions to come forward and publicly list their property investments. This is quite an ambitious pipeline that in a real sense could be what takes the REIT market in Pakistan to the next level and in the long run grow and be stable and prosperous to the benefit of the concerned stakeholders.

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