Why Shariah Finance and Real Estate Are A Perfect Match
Ferzana Haq and Natalie Breen
Islamic finance continues to grow as a prudent alternative to conventional debt-based structures. Financial assets total more than US$1.3 trillion and instruments are expanding into new countries beyond its traditional markets in the Middle East and Malaysia. At its core, Shariah principles favour the development and sharing of risk in physical assets, which contribute to the economic growth of society. There is therefore a natural match between the Islamic finance model and the acquisition and development of real estate assets. Moreover, Islamic finance is a flexible tool which can be used for a wide range of real estate financings. This ranges from residential mortgages (such as the United National Bank of Pakistan's lease-based mortgage, the first of its kind in the UK), to large scale financings such as Qatari Diar's acquisition of the Chelsea Barracks and the construction of the Shard of Glass in London. More recently, Islamic finance techniques were used by Emaar Properties in Dubai to refinance existing facilities for the development of the Dubai Mall, the world's largest shopping and entertainment destination.