SECP studies Malaysia model for REIT valuation standards

[Naveed Yaseen]

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has implemented international valuation standards for Real Estate Investment Trust (REIT), for bringing transparency to Pakistan’s real estate sector.

After launching the REIT product in February 2008, the SECP has taken major steps to promote the implementation of best international practices in the field of valuation. After implementation of REIT regulatory framework, it will allow full foreign ownership, free movement of capital and unrestricted repatriation of profits. Besides, it will curb speculation in real estate markets.

The commission has built a strong REIT implementation team, which is multi-disciplinary and includes a civil engineer and a real estate broker, says a news statement issued here on Wednesday.

To study REIT licensing and evaluation, the SECP had selected Malaysia as a relevant jurisdiction. Five officers of the Commission were sent on a study tour to Malaysia in June to understand the problems and issues faced by the Securities Commission Malaysia in the monitoring and regulation of Malaysian REITs. A number of meetings were held with the Malaysian regulator and with the Institute of Surveyors to get first hand knowledge of the REIT market in Malaysia.

A second group of five officers is leaving for Malaysia on Friday to visit valuers and REIT management companies operating in Malaysia. Both the visits have been funded by a World Bank grant.

Under the same World Bank grant, Elvin Fernandez was invited to Pakistan to advice on the implementation of best international practices in the field of valuation.

Fernandez is a qualified property valuer with over 25 years of work experience and is a councilor and fellow of the Institution of Surveyors Malaysia, a fellow of the Royal Institution of Chartered Surveyors, United Kingdom and an Executive Committee Member of the Private Valuers Association in Malaysia. Fernandez is presently the Chairman of International Valuations Standards Committee (IVSC), an organisation responsible for coming up with worldwide standards for property valuations. The REIT regulations of Pakistan have been prepared after studying the IVSC standards.

During his week-long stay in Pakistan, Fernandez met and trained SECP officials, visited large real estate developments and reviewed Pakistan’s fiscal and legal environment. He also met the leading accountants of Pakistan with regard to the implementation of IVSC standards by the accounting profession. Extensive meetings were also arranged with the leading valuation firms of Pakistan.

He was of the view that the present valuation methodologies used in Pakistan are primitive and need to be brought to international standards at the earliest, in order to conduct fair market valuations particularly in case of REITs.

He was of the view that SECP (in collaboration with SBP) should assist the valuation profession to create an institute which would license valuers, have a system of examinations and implement best international practices and standards.

The SECP has received two formal applications for REITs in addition to several queries from promising REIT applicants. All of the above have been for developmental REITs. Throughout Pakistan, buildings with transparent leases are a rare phenomenon.

http://www.thenews.com.pk/daily_detail.asp?id=121869