Practice and Prospect of Islamic Real Estate Investment Trusts (I-REITs) in Malaysian Islamic Capita

Practice and Prospect of Islamic Real Estate Investment Trusts (I-REITs) in Malaysian Islamic Capita

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Paper Presented at The International Conference on Islamic Capital Markets: Regulations, Products and Practices With Relevance to Islamic Banking and Finance, organised by Islamic Research and Training Institute (IRTI), Islamic Development Bank, 27 th - 29 th August 2007, Jakarta. Practice and Prospect of Islamic Real Estate Investment Trusts (I- REITs) in Malaysian Islamic Capital Market By: Dr. Asyraf Wajdi Dusuki * Abstract Over the past three decades, Malaysia has been in the forefront of global initiatives and efforts to establish a viable, sustainable and feasible Islamic Capital Market catering the needs of Muslims and ensuring that its products and services are attractive to all investors and issuers regardless races or religions. The development of a vibrant, efficient and effective Islamic capital market requires the creation of a broad spectrum of innovative Islamic financial instruments and the infrastructure to promote active trading so as to enhance the breadth and depth of the market. One of the most recent investment opportunity introduced in Islamic Capital Market in Malaysia is the Islamic Real Estate Investment Trusts or I-REITs. Islamic REITs funds invest their portfolios in listed real estate securities that own and operate real estate such as residential, commercial, and retail properties, storage facilities, warehouses and car parks. Islamic REITs differ from conventional property funds mainly due to the requirement to strictly observe Islamic investment guidelines and Shariah principles. Thus it provides new investment opportunity for investors who wish to invest in real estate through Shariah-compliant capital market instruments. This paper provides insights into the practice and prospect of Islamic REITs in Malaysia. The application and mechanics of Islamic REITs are examined in the light of Islamic REITs Guidelines issued by Malaysian Securities Commission. As will be evident in this paper, this instrument has its own advantages and value added which would make it the instrument of choice in meeting specific investment interests and needs. * Dr. Asyraf Wajdi Dusuki has a Master and Phd in Islamic Banking and Finance from Loughborough University United Kingdom. He is currently an Assistant Professor in Kulliyyah of Economics and Management Sciences of International Islamic University Malaysia. He is also a Coordinator of IIUM Institute of Islamic Banking and Finance. 1
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INTRODUCTION Malaysia has always been in the vanguard of global initiatives and efforts to establish a viable, sustainable and feasible Islamic Capital Market catering the needs of Muslims and also ensuring that its products and services are attractive to all investors and issuers regardless races or religions. Malaysia is also poised to be a global Islamic financial and capital hub, as envisaged in the Capital Market Master Plan launched by Malaysian Securities Commission in 2001. Essentially, the development of a vibrant Islamic capital market requires the creation of a broad
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Practice and Prospect of Islamic Real Estate Investment Trusts (I-REITs) in Malaysian Islamic Capita

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