Sharia compliant real estate finance
||Ali Parsa and Azadeh Farhoush
||Sharia compliant real estate finance
||19th Annual European Real Estate Society Conference in Edinburgh, Scotland
||According to the latest report by Ernst & Young, Islamic finance assets are expected to hit $1.1 trillion in 2012. This is equal to 33 percent growth from their 2010 levels. With the diminishing of conventional sources of finance, Islamic compliance finance and investment offer attractive potential for global real estate. This paper examines the different methods of Sharia compliant finance and explores their application to real estate finance and investment in Iran and Dubai. Utilising interviews in Iran, Dubai and Germany the paper will compare the different methods of Ijarah financing in the Middle East. This in turn is compared with conventional method of real estate financing. An important result of this study is that ijarah is, in general, not so different from conventional leasing. Although Iran is an Islamic republic operating within an Islamic law for the banking system which prohibits interest exists, interest is still to be found. This shows that changing the legal situation does not suffice to eradicate interest. Ijarah in particular offers the possibility of using an asset for a longer period of time without buying it and therefore it is an alternative to credit financing. It is a famous financing method and an alternative to murabaha, which has been used often. In addition, it is very similar to conventional leasing andfacilitates the shrinkage and closing of contracts for conventional institutes. Thus, it is preferred by conventional financial institutions which are trying to position themselves on the Islamic market.
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