Pick up activities in real estate sector moving in right direction

Interview with Muhammad Ejaz — Chief Executive, Arif Habib Dolmen REIT Management Limited

Induction of mortgage finance facilities will be true game changer for the sector

[box type=”shadow” align=”” class=”” width=””]Profile:

Muhammad Ejaz is the founding Chief Executive of Arif Habib Dolmen REIT Management Limited, which has successfully launched South Asia’s first listed REIT fund. He has been associated with Arif Habib Group since August 2008 and sits on the board of several group companies. He has spearheaded several group projects when these were at a critical stage during their execution. Prior to joining Arif Habib Group, Muhammad Ejaz served at senior positions with both local and international banks. He was the Treasurer of Emirates NBD Bank in Pakistan and served Faysal Bank Pakistan as Regional Head of Corporate Banking group. He also served Silk Bank as Head of Corporate and Investment Banking Group. He also had short stints at Engro Chemical and Shoaib Capital.

Mr Ejaz did his graduation in Computer Science from FAST ICS and did his MBA in Banking and Finance from IBA, Karachi where he is a regular visiting faculty member. He has also conducted programs at NIBAF – SBP and IBP. He is a Certified Director and also a Certified Financial Risk Manager.

Arif Habib Dolmen REIT Management Limited specializes in the REIT management business. It also assists its customers in end-to-end management of real estate projects starting from research/market study to planning and execution. It takes pride in being the introducer of listed REITs in South Asia.[/box]

PAGE: Could you tell us about the recent developments in the real estate sector of Pakistan?

Muhammad Ejaz: Real estate sector has been in focus since the present regime has taken over. We have already started witnessing launch of numerous projects. The government has taken several significant steps such as:

1. Setting up of Naya Pakistan Housing and Development Authority (NAPHDA) and making it operational.
2. Fixed Tax Regime (FTR) for builders and developers along with amnesty for investment in the sector.
3. Subsidy (both direct and interest rate) for affordable housing.
4. Lower tax rate for banks and financial institutions for mortgage financing.
5. Concerted efforts are being made to set up a uniform system for developer finance and mortgage finance in the country; a carrot and stick policy has been introduced by SBP to encourage banks to participate.
6. Introduction of Real Estate Regulatory Authority (RERA) initially for ICT.
7. Regulations for compliance with FATF prescription.

PAGE: How much interest do the investors exhibit in the real estate sector of Pakistan in these trying times?

Muhammad Ejaz: For the past three quarters sentiments have been overwhelmed by COVID-19. This is likely to continue for some time. Local authorities especially the monetary authority have responded very well to the challenge. As a result interest rates have been halved. This has provided the much needed support to the economy. Promulgation of FTR by the FBR provided further support to the system. As a result we have seen activities in the construction sector and prices have either stabilized or even started moving up in few segments. Growth in local consumption of steel and cement also indicate towards increased activity in the sector.

PAGE: Your views on the performance of the real estate sector over the period of last two years:

Muhammad Ejaz: Last two years have been marked by significant political and economic challenges: Regime change, currency adjustment, IMF program, FATF, Documentation drive, COVID-19. Despite all this we have witnessed renewed focus of private sector participants on the real estate business and government’s emphasis on creating an enabling environment especially for the affordable housing sector. Creating a viable eco-system for this sector is not an easy task as it involves integrating functions and responsibilities of federal and provincial governments, financial sector, utilities, infrastructure and contracting activities. The government has demonstrated its will be gradually putting in place all the pixels of the puzzle. As a result, activities have picked up in the sector. It is heartening to note that the pickup in activities is in the right direction i.e. instead of seeing price appreciation and activities in the secondary transactions we are witnessing increased activity in the primary market (new supplies). This would help address the housing shortage challenge.

PAGE: What kind of impact could be seen in the real estate sector during the current year in the wake of the incentives announced by the federal government?

Muhammad Ejaz: We expect introduction of new projects of built up units, which should lead to increased supply amidst stable prices. Introduction of mortgage finance facilities for the general public would be a true game changer. Though, we remain concerned about the level of interest rates and the exchange rate, which may push up the cost of doing business. We expect increased flow of activities towards the documented sector and participation of large local corporates that would enhance the quality and performance standards.