SECP permits Modaraba firms to engage in real estate projects

SECP permits Modaraba firms to engage in real estate projects

SECP lets Modaraba companies do business with each On August 24, news sources said that the Securities and Exchange Commission of Pakistan (SECP) has given modaraba companies permission to deal and trade in real estate projects. According to the new change, the modaraba firms will be able to invest in projects that are approved by the development firms.

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Reports say that the SECP has given permission for all multipurpose modaraba enterprises to invest up to one-third (1/3) of their total assets in real estate. These enterprises must meet the following conditions:

The investments can only be made in assets that have been approved by the Karachi Development Authority (KDA), the Capital Development Authority (CDA), the Rawalpindi Development Authority (RDA), the Lahore Development Authority (LDA), and/or any other development authority in any city of Pakistan. They must also be accompanied by a NOC from one of these authorities regarding a real estate project.
The goal of an investment can be to build properties to rent out or to sell, or it can be a mix of both (rental and development).
Read: SECP is introducing digital AMCs to help people get access to financial services.

Also, if a Modaraba was created just to invest in real estate or if real estate investment makes up one-third (1/3) or more of the Modaraba’s total assets, the firm must have at least two directors who have worked on real estate projects for at least five years. In the same way, an independent valuation report must be gotten before investing.


Also, it has been decided that the Modaraba company’s prospectus must include information about the management experience of the Modaraba company’s sponsors in the real estate business, the type of real estate project to be done, possible locations for the real estate, investment goals, a valuation report, a feasibility study, the legal status of the property, the amount of money needed, the sponsors’ contribution, and whether or not the sponsors’ lock-in period has been met.


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