Critically Analyze Islamic Real Estate Investment Trusts (I-REITS)

This essay provides a critical analysis of Islamic Real Estate Investment Trusts (I-REITS), exploring their types and mechanisms. It defines I-REITS as Shariah-compliant real estate investment schemes, highlighting their appeal for investors seeking income, capital stability, and diversification. The essay discusses the governance of I-REITS, emphasizing the roles of stakeholders and the importance of Shariah compliance. It also contrasts I-REITS with conventional REITs, emphasizing the role of Shariah guidelines and principles. The essay references various academic sources to support its arguments, discussing investment strategies and the expectations of returns from rental income and capital appreciation. It also addresses the regulatory frameworks and market dynamics surrounding I-REITS, including the emergence of Islamic financial institutions and the opportunities for developing competitive Shariah-compliant investment products. The essay concludes by highlighting the unique characteristics of I-REITS and their potential for growth in the financial market.

CRITICALLY ANALYSE
ISLAMIC REAL ESTATE
INVESTMENT TRUSTS I-
REITS

Table of Contents
Types of Islamic Real Estate Investment Trust ........................................................................3
Mechanism of Islamic Real Estate Investment Trust ................................................................3
REFERENCES................................................................................................................................5
Books And Journals ...................................................................................................................5

MAIN BODY
Type of Islamic Real Estate Investment Trust
An Islamic real estate or shariah-compliant real estate is collection of investment
schemes in which tenants operate permissible activities according to the shariah. A real estate is
a special type of mutual fund which allows small investors to participate in with low minimum
investments. Financing of acquisition and development of real estate should be shariah-
compliant, investment of cash and liquidity must be made in shariah-compliant instruments and
also insurance for protecting real estate. It is tax saving and liquidity as compared to normal real
estate funds. Investors looking for I-REITS for income and capital stability, liquidity, quality
real estate, transparency, diversification and expert management. In global Islamic REITS there
is no clear cut regulatory framework, no shariah standards or other Islamic bodies can take-up
responsibilities. These are very beneficial for those who is ready to taker risk and expecting
return, therefore most of the countries are giving priorities ti this type of REIST.
According to the Ma’in, M. and et.al. (2016) Islamic REITS are governed by multiple
stakeholders to ensure maximum investors' protection which are unit holders, managers, trustees,
shariah advice or committee and regulatory authorities. This should, must comply with SC
guidelines on REITS And I-REITS. ALL are established by deed of trust executed by the trustee
who acts on behalf of unit holder and the Islamic REITS managers must ensure that all forms of
investments, deposits, and financing comply with shariah principles.
On other side it also criticized by Indrawan and Ningsih (2019) criticized that There are
various Rental activities that are classified as non permissible financial services based on
interest, gambling/gaming, manufacturer of non halal products or related products, entertainment
activities that are non permissible by syariah, stare trading in syariah non complaint securities
and hotels and resorts. Basically it avoids investing in anything that is related to alcohol,
weapons, defence, tobacco, and conventional financial services.
Mechanism of Islamic Real Estate Investment Trust
Mechanism of I-REITS will be same like conventional REITS excepts for Shariah
guidelines and principles. Collective investment trust fund pooled capital from investors from
buying, Selling and managing real estate property. Further it is criticized by Billah (2019) There
more expectation of new investment and returns. Returns are expected from Rental income and

also capital appreciation is also expected from the holdings of real estate assets over investments
periods for dividend and capital gains. Investment in residential or commercial building ,retail
industries, publicly listed property companies.
According to Alotaibi, Helliar and Tantisantiwong (2020) emergence of Islamic
Financial institutions conised with increasing popularity of REITS open Opportunity for
developed Islamic REITS as competitive but sharia complaint to the conventional one. the
IREIT with conventional REITS built with Requirements of valuation, trustee and management
company and properly. Further, according Aziz, and et.al., (2019) to stated that IREITS
Exhibiting the protective characteristic of low levels and shows a differentiation terms of
property investment products. REITS are basically proposed to invest in at least fifty percent of
its total assets in real estate, whether through single purpose company or direct ownership whose
principle assets consists of real assets.

REFERENCES
Books And Journals
Ma’in, M. and et.al., 2016. Determinants of Islamic real estate investment trust
performance. Advanced Science Letters. 22(12). pp. 4321-4325.
Indrawan, I. W. and Ningsih, W., 2019. Literature Review on REITs and Islamic REITs and
Lessons Learned for Islamic REITs in Indonesia. International Journal of Islamic
Economics and Finance (IJIEF). 2(1). pp. 21-46.
Alotaibi, K. O., Helliar, C. and Tantisantiwong, N., 2020. Competing Logics in the Islamic
Funds Industry: A Market Logic Versus a Religious Logic. Journal of Business Ethics.
pp. 1-24.
Aziz, R. A.,and et.al.,2019. Towards Developing a Conceptual Framework for Islamic Unit
Trust Funds. International Journal of Management and Applied Research, 6(4), pp.397-
406.
Billah, M. M. S., 2019. Modern Islamic Investment Management. Springer International
Publishing.