Karachi: The VIS Credit Rating Company Limited has reaffirmed the Development REIT rating of Globe Residency REIT (GRR) at 'RFR2 (dr)', indicating a high likelihood of successful project implementation despite various economic challenges. The outlook on these ratings remains stable, reflecting modest risk factors impacting the value of REIT assets in the foreseeable future.

According to a statement by VIS Credit Rating Company Limited, Globe Residency REIT operates as a closed-ended, listed developmental REIT with a five-year indicative lifespan. Managed by Arif Habib Dolmen REIT Management Limited, the scheme has the Central Depository Company of Pakistan Limited as its trustee. The primary goal is the construction of nine apartment towers at Naya Nazimabad, Karachi. The project faces economic and regulatory hurdles, including high interest rates and rising construction costs, which have impacted growth in Pakistan's real estate sector.

The overall cost of the GRR project has increased due to design enhancements, such as additional floors, aimed at boosting scalability and meeting future demand. This has extended the project timeline, now aiming for completion by December 2026. By September 2024, 51% of the inventory was sold, aided by a Musharaka agreement with Meezan Bank to co-develop and sell 537 apartments, which helped mitigate inventory risks.

Despite sector challenges, the rating is supported by the project's long-term viability, strategic location, and the sponsor's strong profile. The market conditions and rising middle-income housing demand also bolster the project's prospects. Variations in costs and timelines remain within acceptable limits, reducing completion risk.

Looking forward, the success of GRR will depend on effective sales strategy execution, timely installment collections, and prudent debt management to maintain a stable leverage profile, ensuring the project's successful completion.