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Islamic Reits

This document discusses Islamic REITs (Real Estate Investment Trusts), which are collective investment vehicles that pool money from investors to buy, manage, and sell real estate in accordance with Shariah (Islamic law) principles. The key differences between conventional REITs and Islamic REITs are that Islamic REITs must be approved by a Shariah committee and can only involve permissible activities and financing. The document provides a brief history of Islamic REITs in Malaysia, noting some of the first Islamic REITs launched. It also identifies issues with a lack of standardization in Shariah standards and various financial ratios. Ways to overcome these issues include improving Islamic REIT quality and management and establishing a

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271 views8 pages

Islamic Reits

This document discusses Islamic REITs (Real Estate Investment Trusts), which are collective investment vehicles that pool money from investors to buy, manage, and sell real estate in accordance with Shariah (Islamic law) principles. The key differences between conventional REITs and Islamic REITs are that Islamic REITs must be approved by a Shariah committee and can only involve permissible activities and financing. The document provides a brief history of Islamic REITs in Malaysia, noting some of the first Islamic REITs launched. It also identifies issues with a lack of standardization in Shariah standards and various financial ratios. Ways to overcome these issues include improving Islamic REIT quality and management and establishing a

Uploaded by

Yuuki Kazama
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ISLAMIC REITS

By :
Suraya
Nik Faiz
Said Mahfuz
Hazeem
WHAT ARE REITS?
 REITs or “Real Estate Investment Trusts” resemble mutual funds, though it holds
individual properties rather than stocks or bonds.
 It is a type of company that lets investors pool their money to invest in a collection of
properties or other real estate assets.
 Investors buy shares in REITs with the goal of receiving rental income on the
properties and participating in price appreciation.

 The types of REITs :


 Equity REITs - typically own large commercial buildings, retail storefronts, or apartment buildings, although
specialty REITs might own hotels or other properties in the hospitality industry.

 Mortgage REITs - own the debt on the properties, not the properties themselves. They operate like a
mutual fund that owns mortgages and collects the payments.
WHAT IS ISLAMIC REITs?
• Islamic REITs are collective investment vehicles that pool money from investors to buy, manage and
sell real estate but in the standard of Syariah compliance .

• An Islamic REITs is an investment vehicle that invests primarily in:


a. income-producing Syariah compliant real estate, and/or,
b. single purpose companies which are Syariah compliant whose principal assets
comprise Syariah compliant real estate.

• An Islamic REITs provide a new investment opportunity for investors who wish to invest in real estate
through Syariah compliant capital market instruments.

• An Islamic REITs is an effective means of gaining investment exposure to large Syariah-compliant


commercial properties.
Comparison CONVENTIONAL REITS FEATURES ISLAMIC REITS
REITs & I-REITs
Should assign a Shariah
No necessity of Shariah committee for
Shariah Committee
advisor/ committee confirmation of Shariah
conditions.

Permissibility of activities ONLY allowable activities


No constraint
perform by tenants approved

Manager should concern


Companies insurance with
the availability of
insurance companies as Insurance for properties
insurance before
permitted by trustee
conventional.
Financing should be
No limitations Financing
Shariah compliant
HISTORY OF ISLAMIC REITS IN MALAYSIA
■ It began as ‘property trust’ with the first listing in 1989 by Amanah Harta Tanah PNB 2,
followed by the Arab Malaysian First Property Trust.
■ However, it never took off in Malaysia market until its rebranding in 2006 to REITs and
SC Malaysia’s introduced a guideline. The Guidlines set out 2 things: legal requirements
for the formation of REITs; and requirements for issuing, offering or inviting to subscribe
or purchase units of REIT.
■ The first Islamic REIT in world introduced in 2009 called the Al-Aqar KPJ REIT. Invested in
6 hospitals with the market value of the properties estimated at USD138million.
■ The second Islamic REIT, Al-Hadaharah Bousted REIT introduced in February 2007. The
Al-Hadaharah Bousted REIT underlying assets were plantation estates.
■ In December 2008, Malaysia introducted a third Islamic REIT called the AXIS REIT, which
is the world’s first Islamic industrial/office REIT. AXIS REIT was originally established in
August 2005 as a conventional REIT. It was restructured according to SC’S Islamic REIT
guidelines to be classified as a Shariah-compliant REIT.
■ In May 2013, KLCC REIT was introduced, which is the world’s first Shariah-compliant
stapled REIT.
■ Stapled REITs are investment vehicles which includes two or more separate entities
‘stapled together’ to trade using a single new financial instrument.
■ KLCC REIT is the combination of three prime assets; Petronas Twin Towers, Menara
3 Petronas and Menara ExxonMobil.
■ Until now, there are 18 REITs listed on Bursma Malaysia.
ISSUES
■ Lack of standardization in Shari’ah standards

■ Various financial ratios

■ Limitation of investment boundaries


WAYS TO OVERCOME THE ISSUES
■ Improving the quality of the Islamic REITS

■ Improve the quality of management of Islamic REITS

■ Clear, transparent and universally acceptable Shari’ah


framework

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