12th Asian Real Estate Society Annual Conference 9-12 July 2007 The Macau Tower, Macau, China Islamic REITs: A Syariah-compliant investment option Ting Kien Hwa * Abdul Rahman Md. NoorDepartment of Estate Management Faculty of Architecture, Planning & Surveying Universiti Teknologi MARA 40450 Shah Alam, Selangor Malaysia *Contact author: Tel: 603 – 5544 4217, Fax: 603 – 5544 4353, E-mail: [email protected]Keywords: Islamic REITs, Syariah-compliant, Malaysia
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2Islamic REITs: A Syariah-compliant investment option ABSTRACT With the release of Guidelines on Islamic Real Estate Investment Trusts by the Securities Commission in 2005, two new Islamic REITs have been listed on Bursa Malaysia. Interestingly these two REITs, Alaqar and BSDreit, provide opportunities for indirect property investment in two special property sectors i.e. hospitals and oil palm plantations. This paper examines the special Syariah-compliant features of Islamic REITs with emphasis on Islamic REITs in Malaysia. Keywords: Islamic REITS, Syariah-compliant, Malaysia Introduction Islamic REITs are collective investment vehicles that pool money from investors to buy, manage and sell real estate. An Islamic REIT 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. The incomes from the real estate or companies are used to provide returns to its unitholders. A portion of the REIT funds can also be invested in other Syariah compliant asset classes e.g. cash or Syariah acceptable deposits. Islamic REITs provide a new investment opportunity for investors who wish to invest in real estate through Syariah compliant capital market instruments. An Islamic REIT is an effective means of gaining investment exposure to large Syariah-compliant commercial properties. Investments in Islamic REITs provide opportunities to hold stakes in high-grade Syariah-compliant real estate which may otherwise have been difficult or impossible for a retail investor to hold.