Viewpoint – Innovation in Islamic real estate investment: Is there any?

Categories: Viewpoint

I was recently asked in a Q&A session what innovations there are in the Islamic real estate investment world at the moment and I confess that I had to admit that I wasn’t aware of any.

The global financial crisis started 10 years ago this summer, and as you will recall, took two years to largely work itself out. It’s a bold statement, but innovation was not welcomed in the financial world that recovered from this shock.

Investors, banks, regulators and perhaps even the professional advisors themselves wanted something they understood and something relatively boring. Boring was and largely remains good.

I was part of the teams that 15 years ago or so did the first Shariah compliant levered real estate acquisitions in Scotland, Sweden and Switzerland…it seems that the S countries had been previously neglected! We were working with local tax, legal and banking professionals and sometimes the regulators as well to take our previous knowledge and see how it could be applied. Now that the basic structures are understood for most countries, the level of innovation is frankly considerably less. As a real estate investment manager, our own 90 North likes to think that we innovate in some way, but making the real big differences are behind us, or at least for the moment.

However, if you dig deeper you can find some hope of excitement. The UK is known for its fintech and so I’m delighted to see that Yielders has established itself as the first Shariah compliant equity crowdfunding platform in the UK.

Regulated by the Financial Conduct Authority is a great credential and while the underlying real estate is giving investors what they want, such as a simple investment without undue financial engineering, their route to raising the equity is something new. It would be great to see this initiative grow from strength to strength.

I hope that with the passage of time there will be room for major innovation again in the future and for the meantime we should applaud those working to make a difference.

Original article appeared in Islamic Finance News.