Apr 26, 2024

Real state investment trust

Construction Investment Fund

Construction funds are financial institutions set out in Clause (H) of Article (1) of Law of development of new financial tools and institutions aiming to facilitate implementation of general policies of Article (44) of Constitution, which are established in compliance with regulation related to construction investment funds, approved on April 18, 2009 by the Board of Securities and Exchange Organization. A construction fund is a structured solution for participating financing construction of real estates, and it authorization is issued by Securities and Exchange Org. and they are operated under supervision of the said Organization. Construction funds are deemed as project-based funds and such funds aim to make use of investment opportunities in the capital market for helping the housing sector and also making use of exiting investment opportunities in the housing sector for all interested investors.

 

Activity Period of Construction Investment Funds

Activity period of a Fund begins as of the first working day after receiving fund operation authority from Securities and Exchange Organization and continues until its liquidation. Investors receive Registered Certificate of Investment in return for investment in the Fund according to the approved directive issued by the Organization. The liability of investors for the Fund’s obligations is restricted solely to the basic price of each their investment unit in the Fund. Ultimately, after completion of construction project, the project is offered via bidding and is sold at the highest price and the resultant earnings are distributed among the investors of the fund, including the owner of the land and holder of construction license.

 

Privileges

Privileges of such Funds are as follows:

1)     Creation of a new method of financing in the construction financing system (which was traditionally on the basis of participating contracts, getting loan from banks and forward sales

2)     Supplying financial resources or the project owner

3)     Provision of opportunity for creation of official brand for the structure of the Fund

4)     Constructor or land owner’s certainty of financing and availability of sufficient capital for launching and completion of the project

5)     Direct enjoyment of investors of interests resulting from the shared ownership of constructional projects and preservation of investor’s purchasing power against increase in land and construction price in the project area

6)     Reduction of probability of abuse of the fund’s capital or engaging in an activity other than that set out in the Fund’s articles of association and prospectus due to continuous supervision and verification of activities by the auditor and trustee

7)     Convertibility of entire or a part of the units of the Fund in to cash fund at any time

8)     Receiving the latest information relating to the Fund and the Fund’s constructional project via website of the Fund

9)     Providing for opportunity of investment in great and income-bearing projects for small investors

10) The housing market being private and lack of existence of pricing standard in contrast to the capital market transparency for financing and secondary trading of securities

11) Highly liquidity of the Fund’s units in comparison to direct investment in constructional projects and convertibility of entire or a part of it into cash fund

12) Reduction in overhead cost and making use of economies of scale

13) Reduction in investment risk in investor’s assets portfolio due to existence of stable and fairly low-risk assets