SBP eases banking regulations to encourage real estate investment

KARACHI: The State Bank of Pakistan has Wednesday amended capital adequacy regulations, lowering the risk weight from 200per cent to 100 pc, to facilitate bank and development finance investments in Real Estate Investment Trusts (REITs) to boost the housing and construction sector, ARY News reported.

In order to provide further support to the development of the real estate sector, the central bank has “amended its capital adequacy regulations by significantly lowering the applicable risk weight”.

With this favorable change for the financial institutions, investments in real estate is likely to see a surge as REITs are companies that raise funding from the general public and institutions and deploy these funds through investment in real estate properties.

“With the aforesaid changes in capital adequacy regulations, banks/DFIs will now be able to increase their investments in REITs without the need to allocate a relatively large amount of capital,” SBP said in its press statement.

This will result in banks promoting the real estate sector development in the country.

“The enhanced participation of financial institutions, backed by regulatory initiatives, would also encourage REIT Management Companies to launch new REITs, providing a further boost to the Government’s agenda for the development of housing and construction sectors.”