The rupee is being held. REITs are the exit.

The rupee is being held again

Muzamil opens with the warning he has repeated on this channel for years. The real effective exchange rate is back near 106. The dollar is being controlled. Hafeez Pasha has said publicly that the actual value of the dollar may already be touching Rs. 300 to Rs. 320. Muzamil remembers what the last correction did to him personally: “मेरी तो नेटवर्थ हाफ हो गई” when the rupee moved from 160 to 320, five years of work halved in months.

His argument to the audience is the same one he has been making. The stock market is a good long-term instrument but volatile on narrative. Property is the Pakistani default, but most of what Pakistanis buy is not property — it is a file. “अमीर आदमी मजीद अमीर हो गया” while the ordinary buyer sits on paper with no construction, no productivity and no liquidity. To talk about the regulated alternative, he brings in Muhammad Ejaz, CEO of Arif Habib Dolmen REIT Management, and, as Muzamil notes, a fellow FAST graduate from 1991.

Why a banker ended up building Pakistan’s first REIT

Ejaz traces his path through the 1992 reforms — new banking licences, an opening foreign exchange market, capital market reform — as an unusually lucky moment to enter finance. Real estate was the obvious next reform target because, in his words, “ये वन ऑफ़ द मदर इंडस्ट्रीज इसको आप कहिए कि हैं.” The first REIT regulations arrived in 2008. He joined Arif Habib Group specifically to build a REIT management company and launched Dolmen City REIT in 2015 as South Asia’s first. The real inflection, in his telling, was 2022, when the regulatory framework became workable and activity began to compound.

His frustration with Pakistan’s pace of reform is quiet but constant. “पाकिस्तान में चीजें जो हैं वह कई दफा साइकिल्स में फंस जाती हैं और स्लो मूव करती हैं,” he tells Muzamil. “हम लोग 20 30 साल पीछे चल रहे होते हैं वहां से जहां हमें होना चाहिए.”

Why the informal sector won for so long

Muzamil pushes on the obvious question. If REITs have existed since 2008, why did the public never hear about them while every WhatsApp group in Islamabad was pushing plot files. Ejaz’s answer is structural. Real estate in Pakistan was organised as AOPs or private limiteds, which could not pool capital at scale. Formal finance stayed away because the sector was not documented. “Businesses are managed the way they are financed,” he says. No formal finance, no formal sector.

The turn came when corporate houses — Arif Habib, Packages, Lucky, Nishat — entered and forced a comparison. But the mindset issue, Ejaz argues, is deeper than regulation. People hide income to evade tax, and once you are hiding you cannot scale. His group’s own advantage was that its sponsors chose to open up. “आप चीजों को इवेट करके बड़ा काम नहीं कर पाएंगे.”

Why construction, not files

Muzamil, who grew up in Islamabad, presses Ejaz on why Arif Habib stayed in actual construction while the easy money was in file rotation. Ejaz’s answer is partly ideological and partly economic. Construction, he argues, is one of only two sectors — the other is agriculture — where roughly seventy percent of inputs are indigenous. Labour is about twenty to thirty percent of construction cost and is entirely local. Cement, steel, tiles, cables, paint are all domestic. Pakistan needs growth that does not blow up the current account, and construction is that growth.

His indictment of policy is direct. Plot sales became the sector’s substitute for finance: “प्लॉट्स की सेल जो है वो आपकी सोर्स ऑफ फाइनेंसिंग बन गई है टू डू बिनेसेस.” In the absence of a mortgage market, developers pre-sell plots to a public that has no other way to feel secure. He is careful not to dismiss the informal sector wholesale — DHAs, Bahrias, Faisal Town, Lake City and Park View produced real housing — but the model is a policy failure, not a private-sector failure.

How the REIT actually works

Ejaz walks Muzamil through the mechanics. A REIT is a trust. A trustee — usually the Central Depository Company — holds the assets on behalf of the unit holders. The SECP has defined the HR, technology, reporting, rating, valuation, audit and listing requirements in detail. His group has built 18 REIT funds. Two are rental (Dolmen City Karachi and Dolmen Mall Lahore). The rest are developmental, including seven inside the 1,400-acre Nya Nazimabad project in Karachi, two in Surjani, one on the Ravi Riverfront in Lahore and one in CBD Lahore. Total assets under management are over $4 billion. Capital raised in the last three to four years is around $700 to $800 million.

The democratisation piece is what Muzamil keeps returning to. A Rs. 22 billion property gets carved into 2.2 billion units at Rs. 10 each. Someone with Rs. 10,000 can own a fractional share of Dolmen Mall. And because units are listed on the stock exchange, they are liquid. “अगर आपके पास 5 अरब के यूनिट्स पड़े हो, आपको ₹100 चाहिए तो आप अपने यूनिट्स बेच के ₹100 जनरेट कर सकते हैं,” Ejaz explains.

The numbers Pakistanis have never actually run

Muzamil describes running the numbers on his own Islamabad home and finding a rental yield of two to three percent — before tax, before maintenance, before the deadweight of a bad tenant. He asks Ejaz what real returns look like on institutional rental assets.

Ejaz’s answer is the sharpest moment in the conversation. A good Karachi office yields around six percent a year in cash rent. But — and this is what Pakistanis miss — a good asset appreciates fifteen to twenty percent a year in a country where ten percent inflation is considered stable. Add the six percent yield and you are at a twenty-six percent total return. Rental agreements typically escalate eight to ten percent a year, doubling the rent every seven years. On Dolmen Mall specifically: when the REIT launched, first-year rental yield was ten percent on the Rs. 22 billion valuation. Today, at face value, the yield is around thirty percent, and it is still growing.

The reason no one knows this, Ejaz argues, is that the rental market has never been institutionalised. Individual landlords evict tenants because a son moved back or a daughter’s wedding is coming up. “इसका ना इकॉनमी से कोई ताल्लुक है, ना मेरे हालात से कोई ताल्लुक है.” Built-to-rent, the strongest real estate model in the world, barely exists in Pakistan because it requires patient capital and no one has been willing to commit it.

Property Share, and why it is not a REIT

Muzamil raises a fair objection. Arif Habib recently launched Property Share, which allows fractional ownership of individual apartments. If a REIT already exists, why do you need another fractional product. Ejaz’s distinction is clean. When you buy a unit in a developmental REIT like Globe Residency, you are becoming a shareholder in the business that builds and sells apartments. When you buy a Property Share, you are becoming the owner of the apartment itself — the buyer, not the builder.

The product exists, he explains, because Pakistan has no mortgage market. In the US, a Rs. 100 property with Rs. 20 down means Rs. 80 in mortgage. In Pakistan, you save in a bank at four to five percent while property appreciates at fifteen to twenty. You are always chasing the market. Property Share lets you buy 100 square feet at a time with the same rights and obligations as the full owner, keep buying as money comes in, and in the meantime earn a proportional share of rent and appreciation. It is, effectively, a substitute for the mortgage the country does not have.

On Globe Residency itself, Ejaz offers a concrete number: in about three years, unit holders have received roughly Rs. 5.25 to Rs. 8.5 in dividends on a Rs. 10 face value, and the unit price has doubled to around Rs. 20.

Three things a policy maker could actually fix

Muzamil pushes Ejaz for specifics, because he is tired of hearing that “policy should be better” without anyone naming the policy. Ejaz gives him three.

First, Section 99A of the Income Tax Ordinance. It was meant to let developers transfer property into a REIT without capital gains tax being triggered on historical under-declaration. It expired in 2023 and was not renewed. The cost of that single failure, he says, is precise: Dolmen Mall Lahore cost Rs. 50 billion to build over five years, now generates Rs. 7 billion in operating income, and at a seven percent cap rate is worth Rs. 100 billion. Moving it into a REIT structure today would cost 24 billion rupees in tax. So it does not happen.

Second, cement. Fifty-five rupees of every hundred rupees of cement is tax. The government is actively raising the cost of construction in a country the World Bank says needs twelve million housing units.

Third, the banking system. Ninety percent of Pakistan’s financial assets sit with banks. More than sixty percent of that has been lent to the government. “Banks भी बैंकिंग नहीं कर रहे हैं. T बिल खरीद रहे हैं जो कोई काम नहीं है,” Ejaz says. If ten percent of bank assets went to mortgages, the housing shortage would begin to solve itself. It doesn’t, partly because the culture cannot absorb where the down payment came from — you can build a mosque with cash but you cannot buy a house with it — and partly because the incentive structure rewards lending to the state.

His diagnosis is bleak. “अगर आप पूरा टैक्स पे कर रहे हो तो लोग समझते हैं आप बेवकूफ हो.” The system taxes formality and rewards evasion, then borrows from abroad to fund itself, then marks up the borrowed money to citizens who have already sent their savings to Dubai and London.

Poverty has entered the thinking

Muzamil closes with a wider frame. Across developing Asia, reform arrives one of two ways — governments do it themselves, or society is forced through a violent, chaotic version. For a country the size of Pakistan, he suspects the second version is now baked in. He asks Ejaz whether that is fair.

Ejaz refuses to generalise, quoting Oscar Wilde: every generalisation is wrong, including this one. But he concedes something harder. Poverty, he says, has now entered thought itself. “20 साल पहले हम जिन जगहों पे कराची में सेवन स्टार होटल बनाने की बात करते थे, वहां आप थ्री स्टार होटल की बात भी नहीं कर रहे हैं. सोच हमारी नीचे आ गई है.”

His prescription is narrow but firm. The 35-to-65 age bracket, the people who cannot leave and still have energy, need to do something. Arif Habib was built here. Dolmen was built here. Lucky and Nishat were built here. TCF was built here — its students end up at Harvard. Pakistani startups reach Elon Musk. The work is being done. It is just being done too slowly, and it is not being propagated.

Muzamil ends where he started. Study REITs. Not because they are guaranteed, but because they are the next evolution of how construction and property investment will have to happen in Pakistan. Transparent, regulated, liquid. And, given where the rupee is being held, more urgent than most listeners realise.