The News | 7 June 2023
FPCCI calls on govt to unveil rules for agriculture REITs to boost growth
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called upon the government to unveil rules and regulations pertaining to agriculture real estate investment trusts (REITs) to boost growth in the agriculture sector.
FPCCI President Irfan Iqbal Sheikh said that this may be implemented within the framework of the rules and regulations announced by the government of Pakistan in April 2015 related to the Real Estate Investment Trust Regulations, 2015.
“We have witnessed that the recent floods have destroyed a lot of agricultural land and its output. Additionally, due to climate change people are fearing this may happen in future as well. Hence, the government of Pakistan should announce strong and efficient agriculture polices; and, agri REIT will be a significant step towards this direction,” he explained. Sheikh pointed out that the import of food items would continue to drain our foreign exchange on one hand and the cost of imported food items would increase substantially over the years, which would result in higher inflation. This, he added would push millions of people below the poverty-line.
Pointing to the increasing global population and warming of the planet, the FPCCI president said that people were becoming conscious about preserving limited resources, and efforts were afoot to enhance agricultural yield.
“In Pakistan, on one hand we are operating at a very low yield as compared to international standards on almost all of our agricultural crops, and on the other our population is increasing far more swiftly than other countries. Therefore, to feed our people and to export agricultural products, we must increase the yield of all our crops as the land will not increase,” he added.
This feat requires huge investments, which is difficult for individuals or small landowners. Agriculture REIT has the potential to significantly transform the Pakistani agricultural landscape. Under farmland REIT, large stretches of land can be developed for the purpose of selling to individuals or other legal entities to generate high yield using modern technologies.
Sheikh further stated that one of the advantages of farmland REIT is that the total cost of developing the property gets divided among the final owners of the land, which is usually small as compared to buying the entire property. “This cost of development includes sourcing water, laying roads, preparing the land, availing scientific farming techniques and employing more staff for the upkeep and maintenance of land and output,” he added.
FPCCI proposes that an SRO should be issued by the Securities and Exchange Commission of Pakistan (SECP) for the agriculture REIT. This SRO should be in line with SRO 328(I)/2015; related to current REIT regulations. Additionally, farmland REIT should be in line with current REIT Management Company (The RMC), and it should also be a Non-Banking Finance Company (NBFC) to be licensed by the SECP to carry out REIT management services in accordance with the Companies Ordinance 1984.