Industry observers anticipate a boost in the UK Islamic real estate investment market - IFN

Industry observers anticipate a boost in the UK Islamic real estate investment market

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UK: Over the past two years the UK, and particularly London, has seen a wave of inward financing from Shariah compliant investors in the real estate sector. The recent announcements made by the UK government regarding an inaugural Sukuk issuance, along with the launch of an Islamic equity index by the London Stock Exchange, have spurred a renewed confidence in Shariah compliant instruments in the country; and it is hoped that the upcoming sovereign Sukuk could herald multiple subsequent issuances from UK government agencies, local councils and corporates. Following the launch of the National Infrastructure Plan, the country is said to require approximately GBP300 billion (US$491.53 billion) in infrastructure investment over the next decade; which should offer abundant opportunities for Shariah compliant real estate financing. Just last week, Gatehouse Bank entered into a government-backed joint venture with Sigma Capital Group for the construction of residential properties worth GBP700 million (US$1.14 billion). Expressing his confidence during the 10th International Real Estate Finance Summit, Shabir Randeree, the managing director of DCD London & Mutual, said: “I think a UK sovereign Sukuk will open the floodgates for other western sovereign issuers and is going to be issuance motivator on the supply side for those who want to raise money." Apart from the traditional segments such as offices, distribution, retail and residential development; other growing trends in the UK real estate market include investment ventures in student accommodation, residential investment, hotels and healthcare. Sarah Gooden, a partner at Trowers & Hamlins, points out that: “These are all distinct sectors and are a natural fit for Islamic finance because they are fulfilling a social need. All currently represent opportunities for funding and investment.” However challenges remain which may impede the growth of the sector: including a dearth of re-Takaful avenues which could prevent adequate and appropriate Shariah compliant securitization of investment risk, according to Dan Martin, a development underwriter at Cobalt Underwriting. Iconic Islamic real estate investments in the UK include the development of The Shard, Chelsea Barracks and Battersea Power station. These ventures have attracted substantial inward foreign direct investment from various Islamic countries. The UK real estate market has thus far succeeded in offering prospective investment opportunities both in high-end residential and commercial property and in the lower end student accommodation and affordable housing sector.