Real Estate Investment Trust (REIT)

REITs FAQs

1. How REIT Funds can earn money for you?

The money raised through issuance of units i.e. REIT Fund is utilized in either buying property or constructing property. The return to unit holder is received when the property is either sold or is rented out.

The unit holder receives the return on his investment either through dividend or capital gain. Usually when the property of REIT Scheme is rented out, the rent of the property is received which is then distributed to the unit holders in form of dividend.

Unit holders also can sell off the units in stock exchange if the price of the unit appreciates on the stock exchange. This is known as the capital gain on a unit. The price of unit increases either due to speculation or increase in net asset value (NAV).

2. How is the RMC compensated for it services?

The RMC is entitled to a remuneration of an amount as permissible by the SECP under the REIT Regulations, 2008.

3. Are returns from REIT taxable?

REIT Schemes distributing ninety percent of income as dividend are exempt from payment of income tax at Scheme level. The unit holders are subject to tax on dividend distribution by REITs at the applicable tax rates.

4. If REIT scheme is wound up, what happens to money invested?

In case of winding up of a scheme, the RMC managing the fund shall be liable to pay a pro-rata sum based on the proportion of investment in the fund at the prevailing NAV after adjustment of expenses.

5. What is the difference between Closed End and Open End Funds?

Closed-end funds have a fixed number of issued shares traded on an exchange. They generally do not issue new shares after the close of the subscription period. Because the supply of shares is limited, the traded price of the closed-end fund will rise and fall depending on supply and demand, just like shares of other companies traded on an exchange.

Open-end funds are allowed to issue new units and existing units can be realized or redeemed on demand. As there is no limit to the fund size, the price of the units does not rise and fall in response to demand, but is dependent on the value of the funds underlying assets.

6. Can non-resident Pakistanis (NRPs) invest in REITs?

Yes, non-resident Pakistanis can also invest in REIT Schemes. Necessary details in this respect are given in the offering documents of the schemes.