PACRA maintains the entity ratings of Sitara Heights (PVT). Limited || Outlook Stable

The assigned ratings reflect Sitara Heights’ established presence in the real estate development sector, supported by sponsor experience and a diversified project portfolio across Lahore and Faisalabad. The Company is undertaking six projects, of which five have been launched, with execution progressing at varying stages. Land for all projects has been fully acquired, providing a stable operational base. Key projects in Lahore and Faisalabad have advanced beyond critical construction phases, with meaningful inventory sold and foundations largely completed, while a newly launched housing project in Faisalabad has shown encouraging market traction. The Gold Vista project remains delayed; however, it is expected to form part of a proposed Real Estate Investment Trust (REIT) structure, alongside another project under consideration, as part of the Company’s longer-term strategy, though execution and timelines remain uncertain.
The Company follows an advanced booking model, with revenue recognized based on the percentage of construction completion rather than booking activity. During FY25, revenue declined to PKR 662 million (FY24: PKR 864 million), primarily due to slower construction progress amid inflationary cost pressures, liquidity constraints, and broader sector challenges. Management successfully navigated key early-stage construction bottlenecks during the year, supporting expectations of relatively smoother execution going forward. Improved capitalization following a reduction in borrowings during FY25, together with positive operating cash flows and adequate liquidity, underpins the revision of the outlook to Stable. However, the ratings remain constrained by execution risk inherent to the business model and governance limitations, as the Board comprises only sponsor-linked executive directors with no independent representation or formal committees.
While leverage reduced during FY25, borrowings are expected to rise over the medium term as additional debt is drawn to support ongoing projects. Accordingly, capitalization metrics will remain sensitive to execution timelines and cash flow realization. Sustained improvement in construction progress, timely conversion of receivables into cash, disciplined debt utilization, and consistent disclosure on project execution and revenue recognition will be key to maintaining the current rating profile.

About the Entity
Sitara Heights (Pvt.) Limited is a private real estate development company incorporated in 2019, engaged in residential and commercial projects primarily in Lahore and Faisalabad. The Company operates under an advance-booking model, with revenue recognized based on construction progress. Ownership is sponsor-concentrated, with Mr. Khalid Riaz holding 88% and his son, Mr. Fazeel Abdullah, holding 10% of the shareholding. The Company is also exploring longer-term sustainability initiatives, including the potential establishment of a REIT, though this remains at an early stage.