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SHARIA’A COMPLIANT PROPERTY FINANCING

SHARIA’A COMPLIANT PROPERTY FINANCING. Jonathan Lawrence Partner Kirkpatrick & Lockhart Nicholson Graham LLP 110 Cannon Street London EC4N 6AR Direct Phone: +44(0)20 7360 8242 Email: jlawrence@klng.com. The Opportunity.

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SHARIA’A COMPLIANT PROPERTY FINANCING

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  1. SHARIA’A COMPLIANT PROPERTY FINANCING JonathanLawrence Partner Kirkpatrick & Lockhart Nicholson Graham LLP 110 Cannon Street London EC4N 6AR Direct Phone: +44(0)20 7360 8242 Email: jlawrence@klng.com

  2. The Opportunity • EUR 2.6 billion invested in Islamic compliant property transactions in 2004 • £10 billion invested by Middle Eastern investors in European real estate since 1997 • 50% has been Islamic • Over 25% of total cross-border investments into European property are Islamic Source: DTZ Corporate Finance

  3. Principles • Prohibition on charging interest • Risks are shared fairly between borrowers and lender • Provide assistance to society • No uncertainty • Prohibited investments - property use

  4. Concepts • Sharia’a • Riba • Ijara • Murabaha • Istisna’a

  5. Islamic Investors invest in Islamic Fund owns 100% of Islamic Lessee Bank Ijara lease occupational leases buys Occupational Tenants Property Classic Ijara Structure

  6. Ijara Lease Provisions • Linking rental payments and interest • Default interest • Insurance and maintenance • Sharia’a board clearance

  7. Hybrid Ijara Structure: Bank which does not want to own property Islamic Investors Non-Islamic Charity owns 100% of invest in owns 100% of Parent Company Islamic Fund Share security owns 100% of owns 100% of Non-Islamic Borrower/Lessor Ijara Lease Interest bearing loan Bank Islamic Lessee Security occupational leases rent buys Property/Rental Income Security Property Occupational Tenants

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