Islamic finance standard documentation in the context of real estate finance transactions
Produced in partnership with Foot Anstey LLP
Islamic finance standard documentation in the context of real estate finance transactions

The following Banking & Finance guidance note Produced in partnership with Foot Anstey LLP provides comprehensive and up to date legal information covering:

  • Islamic finance standard documentation in the context of real estate finance transactions
  • Ijarah
  • Diminishing Musharaka
  • Commodity Murabaha
  • Structuring with conventional borrowing
  • Legal, tax and regulatory issues
  • Islamic property investment
  • English law and Shari'ah

Islamic real estate finance is becoming ever more popular and increasingly mainstream in the UK and world property markets. Global assets of Islamic finance are estimated to be around $US 2.05 trillion, with Islamic banking contributing to 71% of that total. This has been and will continue to be fueled by developments at home and abroad, with shifting demographic trends, rising income levels, increased investment outside the Gulf Co-operation Council by Middle Eastern investors, strong investment returns in the Halal, infrastructure, and Sukuk bond sectors and the UK is well positioned to continue to reap the benefits of this ever expanding market.

In addition, non-Islamic market participants are increasingly looking to Islamic financing structures to supplement conventional equity and debt funding.

The purpose of this Practice Note is to explore in some detail the main Islamic real estate finance structures:

  1. Ijarah

  2. diminishing Musharaka and

  3. commodity Murabaha,

focusing on the documentation required for each structure and the legal, tax and regulatory issues which underpin them in the UK. This Practice Note will also touch upon the principles and practicalities involved in Islamic real estate investment in the context of UK real estate transactions.

Ijarah

Ijarah, literally ‘leasing’, is a structure commonly used in the UK residential property market.

Under this structure, the bank buys the property from the seller and then the bank grants a