Karachi, June 02, 2021: The State Bank of Pakistan (SBP) on Wednesday announced favorable changes in the ‘Basel Capital Adequacy’ framework for the Real Estate Investment Trusts (REITs).
These 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 had submitted their recommendation to the State Bank earlier this year. Now, banks’ investment in REITs will require them to set aside less capital against risk emanating from this investment activity, which is being described as a positive development by the senior bankers.
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 promote 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.
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