ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has granted Modaraba companies permission to deal or trade in real estate projects approved by development authorities such as the KDA, CDA, LDA, and others.
According to SECP, a Modaraba company can hold, deal, or trade in real estate projects under certain conditions.
Modaraba Regulations 2021 as Amended by SECP
In the case of a multipurpose Modaraba, where real estate investment accounts for up to one-third (1/3rd) of the Modaraba’s total assets, the Modaraba must meet the following requirements:
- Investments shall be made only in assets by recognized development authorities, namely the Karachi Development Authority, the Capital Development Authority, the Rawalpindi Development Authority, the Lahore Development Authority, and/or any other Development Authority in any city of Pakistan, and shall be accompanied by a NOC relating to a real estate project from the aforementioned authority.
- The goal of investment can be to develop properties for rental or development or a combination of the two (both rental and development).
In the case of a Modaraba designed specifically for real-estate investment, or where real-estate investment accounts for one-third (1/3rd) or more of the Modaraba’s total assets, the Modaraba must also meet the following additional requirements:
- At least two Modaraba company directors must have at least five years of experience dealing with real estate projects.
- An independent evaluator’s valuation report must be obtained.
- The prospectus of the Modaraba company shall contain information relating to the management experience of the Modaraba company’s sponsors in the real estate business, the type of real estate project to be undertaken, potential locations of the real-estate, investment objectives, valuation report, feasibility study, the legal status of the property, funds required, sponsors contribution, and compliance with the lock in period requirement for the sponsors.
