00%

Contact

Instagram


Latest publications

Preferred Investment Models

DHA’s approach to Joint Ventures and Investment Partnerships is tailored to suit diverse needs and contexts. DHA meticulously evaluate project type, duration, transaction structure, legal frameworks, compliance requirements, and other pertinent factors to determine the most suitable engagement model. DHA aims to craft efficient and optimal arrangements that prioritize profit maximization and risk minimization for both parties over the long term.

Principles for Selecting Investment Model

Summary of Preferred Investment Models of DHA Pakistan

Investment Model Description/Framework
Joint Venture Under Companies Act 2017 framework of Securities and Exchange Commission of Pakistan (SECP)
BOT/BOO Long term infrastructure and utility projects with ROI built in to the revenue/tariff collection
REITs Under REITS Regulation 2022 framework of Securities and Exchange Commission of Pakistan
Rental or Fixed Consideration Framework dependent upon the type of the project, location, duration, ROI, operations, and sector
Revenue & Profit Sharing Flexible revenue sharing or profit sharing models depending upon project type, revenue streams, and applicable governance structure
Structured Transactions (Hybrid) Custom transaction structure on mutually agreed terms and conditions to facilitate large scale investments

Joint Ventures (JV)

To initiate the projects, Partners have the option to collaborate with DHA in a joint venture mode by establishing a Special Purpose Vehicle (SPV) company under the Companies Act 2017, regulated by the Securities and Exchange Commission of Pakistan.

  1. Governance Structure: DHA may choose to acquire a proportionate shareholding in the Project SPV, or explore alternative engagement arrangements, contingent upon the project’s specifics and the finalized terms between DHA and the Joint Venture partner.

 

  1. Repatriation of Profits: Foreign investors and developers can repatriate profits from investments made within DHA real estate by first obtaining an ‘Entitlement Certificate’ from the State Bank of Pakistan, allowing for repatriation on a designated basis. Upon request, the State Bank authorizes an approved dealer to facilitate the remittance of dividends to non-resident shareholders, adhering to procedures outlined in the Foreign Exchange Manual. These authorized dealers, consisting of Schedule Banks, are mandated to handle all inward and outward remittances on behalf of the Company.

 

  1. Governance Structure: DHA may opt to secure proportionate board representation, as stipulated in Companies Act 2017, to bolster effective corporate governance, regulatory compliance, and alignment with stakeholders. Additionally, DHA reserves the option to reinforce governance through mutually agreed mechanisms such as escrow arrangements, the right to conduct audits and reviews, or other pertinent measures.

JVs are ideal framework for collaboration, particularly suitable for:

  1. Investors & developers aspiring to establish JVs with DHA, leveraging the flexibility and regulatory compliance afforded by an SPV structure.
  2. Private equity firms aiming to deploy capital in real estate ventures with DHA.
  3. Family offices and investment funds seeking to diversify their portfolios with real estate investments alongside DHA.
  4. Consortium agreements allowing multiple parties to join forces and sharing risk for large-scale projects.
  5. Strategic Partnerships with established industry players to leverage strengths and expertise.

 

Due to well defined legal framework, JV structure through forming an SPV is suitable for a large variety of the project types in multiple sectors:

  1. Large scale land development projects
  2. Commercial real estate development projects
  3. Residential high rise projects
  4. Residential villas community projects
  5. Utilities provision, Waste Management & Energy
  6. Hotels Development
  7. Entertainment facilities projects

Build-Own-Transfer / Build-Own-Operate (BOT/BOO)

DHA allows structuring investment and operational modalities through Build-Own-Transfer (BOT) or Build-Own-Operate (BOO) arrangements for appropriate type of projects. When designing these transactions, DHA considers various factors to ensure optimal outcomes for investors and operators. This includes allowing sufficient time period for investors to recoup their initial investment and earn attractive return on investment (ROI) while accommodating project specific considerations.

BOT and BOO investment models offer a range of advantages including risk sharing, long-term revenue streams, access to expertise, efficient project delivery, infrastructure development and asset ownership.

BOT and BOO models are particularly attractive for investors seeking long term returns on projects with substantial initial investment and stable revenue streams. Appropriate projects for BOT/BOO models are:

  1. Large scale amenity projects
  2. Utilities provision
  3. Waste management
  4. Power generation
  5. Water desalination
  6. Water distribution

Hotels development

Real Estate Investment Trusts (REITs)

DHA accepts transaction structures based on REITs models. In line with global trends, REITs have emerged as a promising investment avenue in Pakistan, offering investors an opportunity to participate in the real estate sector without directly owning properties. REITs are highly regulated and offer investment security due to compliance and risk management mechanisms.

REITs in Pakistan are regulated by the Securities and Exchange Commission of Pakistan (SECP) under the Real Estate Investment Trust Regulations, 2022. These regulations govern the establishment, operation, and management of REITs, ensuring transparency, accountability, and investor protection. REITs are listed on Pakistan Stock Exchange (PSX). Certain advantages of structuring real estate transactions on REIT model are[1]:

  1. Liquidity through listing on PSX.
  2. High regulation and compliance requirements.
  3. Tax advantage (REIT income is tax free if 90% income is distributed as dividend).
  4. Reduced tax on recipient of dividend income by an investor at 15% instead of 25%.
  5. Easy exit options for large scale investors via Initial Public Offerings (IPO).
  6. Exemption on capital gains tax on any land transferred to REITs.

SECP allows following types of REITs to be structured under the existing regulatory framework:

  1. Public Private Partnership (PPP) REITs
  2. Rental REITs
  3. Developmental REITs
  4. Hybrid REITs

Appropriate projects for REITs model are:

  1. Commercial projects (Malls, Offices, Mixed Use Projects)
  2. Residential Projects (High Rises and Villa Community Development)
  3. Rental Real Estate (Constructed Property)

With multiple REITs transactions currently under approval/structuring, DHA welcomes investors to engage via REIT model.

Rental & Fixed Consideration

DHA allows structuring JVs on rental and fixed considerations for selected projects and properties to accommodate diverse needs of the partners. The framework for long-term rentals or fixed considerations is designed, considering factors such as project type, local dynamics, location, duration, return on investments (ROI), operations, and sector specifics. This approach ensures that the rental investment model not only aligns with our partners’ objectives but also optimizes potential for mutual success. Appropriate projects for Rental or Fixed consideration models are:

  1. Office buildings
  2. Constructed properties
  3. Hotels
  4. Hospitals
  5. Education institutes
  6. Other relevant types of real estate

Revenue & Profit Sharing

DHA accepts revenue sharing and profit sharing models for certain types of ventures, where the cash flows derived are distributed between DHA and the investor in agreed-upon proportions. Typically, revenue sharing is on gross revenue basis, while profit sharing is on net income basis. Acceptability of the exact model depends on the project type, industry dynamics, revenue stream and other relevant factors. DHA is interested in various project types on revenue or profit sharing basis, such as:

  1. Commercial Projects
  2. Sports facilities
  3. Entertainment facilities
  4. Hospitals
  5. Hotels
  6. Utilities provision
  7. Restaurants

Percentage of revenue or profit sharing is negotiated by DHA and differs on project to project basis.

Structured (Hybrid) Transaction

In recognition of the dynamic and multifaceted nature of real estate transactions, investment models, and JV structuring, our goal is to facilitate large-scale investments by providing options that align with the unique needs and preferences of our partners. These structures can be hybrid in nature, combining the best features of more than one transaction type, ensuring optimal outcomes for all parties involved.

  1. Inventory Sharing: Investment collaborations and JVs where consideration of DHA is vested through the mutually agreed share of constructed property/ developed real estate, allowing for collaborative development, cash flow management for development partner and utilization of assets to maximize returns. Inventory sharing mechanism allows for the alignment of long term interests of DHA and development partner.
  2. Hybrid (Cash + Inventory): Investment model combining inventory sharing with fixed considerations offering a balanced approach that leverages both financial security, cash flow management as well as the long term interest alignment for both parties.
  3. Other Mutually Agreed Models: Customized models tailored to specific project requirements or investment objectives, developed through collaborative discussions and agreement between DHA and the development partner/investor.

By offering these diverse structured and hybrid transaction structures, DHA aims to foster innovation, encourage investment, and drive sustainable growth in the real estate sector, positioning ourselves as the preferred partner for large-scale investments in Pakistan’s thriving market.

DHA360 is a modern real estate solution offering effortless access to investment opportunities and authenticated property transactions.

© 2024 DHA 360. All Rights Reserved.

Additional Links
Contact Us

Central Office DHA360, DHA Avenue Mall,
DHA Phase-1, Islamabad
Contact us : +92 51 111 DHA360
Email : [email protected]