The Securities and Exchange Commission of Pakistan (SECP) on Saturday emphasized it does not regulate real estate investment schemes and urged the public to exercise caution when investing in the same.
In a statement, the regulator noted it had received numerous complaints, particularly from senior citizens, who had been deprived of their funds through investments in fraudulent real estate schemes.
“Typically, these real estate investment schemes solicit deposits/investments from general public by promising lucrative returns on their deposited amounts,” it said, adding the perpetrators sought to project their legitimacy through national tax numbers and incorporation certificates of companies registered with the SECP.
“The perpetrators [then] raise deposits from hundreds of individuals in huge amounts by presenting this deposit raising as an investment in a real estate project being developed, by promising an unrealistic monthly return,” it said. These funds, it noted, were collected in bank accounts of unincorporated entities controlled by the perpetrators whereas companies are presented as legal structure to attract investments.
“These real estate schemes operate as Ponzi schemes, initially paying returns to early investors before collapsing and depriving other investors of their hard earned money with no legal recourse for recovery,” it warned.
The SECP stressed that mere registration of a company with it did not permit the raising of illegal deposits/fraudulent investments or offer/guarantee returns on investments on the pretext of investing in real estate schemes. “To protect themselves, the general public is advised to exercise extreme caution and not invest in any such fraudulent real estate schemes merely on the basis of lucrative monthly profit payments,” it warned.
The SECP also clarified that it did not regulate real estate investment schemes except for Real Estate Investment Trusts. “Any suspicious real estate investment activity should be immediately reported to law enforcement agencies,” it added.