SECP issues for the first time the certificate of Shariah compliance.

SECP Grants First-Ever Shariah Compliance Certificates to REITs

The Securities and Exchange Commission of Pakistan (SECP) recently took a groundbreaking step by issuing Shariah compliance certificates to two Estate Investment Trusts (REITs) – Signature Residency REIT and Rahat Residency REIT.

Guidelines for Offering Islamic Financial Services 2023: Bridging Conventional to Shariah

Responding to Pakistan’s Federal Shariah Court (FSC) directive, the SECP introduced the “Guidelines for Offering Islamic Financial Services 2023.” This move aligns with the FSC’s call for an interest-free lending system. The guidelines offer a framework for conventional financial institutions to transition into Shariah-compliant business models. Since their issuance, several entities have sought certification to transform into Shariah-compliant companies.

Signature Residency REIT and Rahat Residency REIT: Pioneering Shariah-Compliant Developments

Two notable REITs have received Shariah compliance certificates: Signature Residency REIT and Rahat Residency REIT. Both are closed-end developmental REITs that mark a significant stride in Shariah-compliant investment opportunities.

Signature Residency REIT: 

With a fund size of Rs. 825 million and an anticipated lifespan of 4 years, Signature Residency REIT is balanced to construct apartments and retail units on its property. Investors stand to gain through the sale of these units to customers.

Rahat Residency REIT: 

Similarly, Rahat Residency REIT, boasting a fund size of Rs. 1,650 million and an indicative life of 5 years, follows the same developmental and Shariah-compliant model.

Shirkat ul Aqad Partnership: Shariah-Compliant Investment Mechanism

Investors in these REITs will engage in a Shirkat ul Aqad partnership. This innovative mechanism facilitates real estate acquisition and various contracts, such as construction, financing, sale, and redemption. All these operations are carefully aligned with the guidelines provided by Shariah Advisors.

Bridging Real Estate and Islamic Financial Markets: Regulated Investment Avenues

The issuance of Shariah compliance certificates to these REIT developments marks a significant stride towards bridging the gap between the real estate industry and the Islamic financial markets. This landmark move connects two pivotal sectors and provides investors who prioritize Shariah compliance with a regulated, transparent, and well-structured avenue for investment.