Real estate trust rules finalised to boost financing
A REIT is a trust that uses pooled capital of investors to purchase and manage income-producing real estate properties
The rules for Real Estate Investment Trusts (REITs) has been finalised with an aim to create new opportunities for financing the real estate sector through the capital market.
The Bangladesh Securities and Exchange Commission (BSEC) published the rules on its website yesterday, following the initial gazette release in mid-July this year.
According to the gazette, the minimum size of a REIT fund will be Tk200 crore, with sponsors required to contribute at least 20% of the total fund, either individually or jointly.
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If the fund is exclusively intended for real estate projects within city corporation areas, the minimum fund size must be Tk300 crore. Moreover, the REIT manager is required to invest at least 2% of the total fund.
A REIT is a trust that uses pooled capital of investors to purchase and manage income-producing real estate properties. The REIT will be established as a trust, and with prior approval from the commission, funds will be raised through private and public offers to invest in the real estate sector.
The REIT fund can be either open-end or close-end. For development schemes, the fund will be close-end with a 10-year term, while for rental schemes, it will be open-end with a 15-year term.
The rules also stipulate that REIT funds must declare cash dividends only, with at least 90% of the distributable net income being paid out as dividends on a yearly basis.
Investments made by sponsors or managers in the fund will be locked in for three years, with at least 10% of the sponsors or managers contribution to the fund remaining locked in until the fund is liquidated.
On 31 March this year, the BSEC approved the REIT Rules, and draft rules were published in January to gather public opinion.
