The global Muslim population exceeding 2 billion has not only made headlines but has also influenced the surge in Islamic investment activity . However Muslims face restrictions on certain types of investments that do not comply with Shariah law . As a result, Shariah-compliant financing systems have experienced significant growth, with more than $2 trillion in financial assets mainly in the Middle East and Malaysia . With the Islamic finance industry projected to grow at a rate of 10 to 12 percent annually, now is the opportune time for the U .S . real estate industry to showcase its Shariah-compliant offerings .
The Global Muslim Population Surpasses 2 Billion, Driving Islamic Investment Activity
In April, the world reached a significant milestone as the global Muslim population exceeded 2 billion . Pew Research had previously predicted that Muslims would become the second-largest religious group in the United States by 2040 . This increasing Muslim population has led to a rise in Islamic investment activity . However, Muslims are limited in their investment options as they adhere to the principles of Shariah law .
Shariah-Compliant Financing: A $2 Trillion Industry Primarily in the Middle East and Malaysia
The Islamic finance industry, based on Shariah-compliant financing, has experienced tremendous growth even before the COVID-19 pandemic . Today, it accounts for more than $2 trillion in financial assets, with a predominant presence in the Middle East and Malaysia . This financing system aligns with ethical regulations outlined by Shariah law and operates without charging interest on loans . Instead, it relies on profit-and-loss sharing models . With an annual growth rate of 10 to 12 percent the Islamic finance industry presents a vast opportunity for the U .S . real estate market to showcase Shariah-compliant investment options .
Shariah-Compliant Investment in Commercial Real Estate: Addressing Ethical Regulations
On the surface, Shariah-compliant investment may appear to conflict with certain types of commercial real estate due to the prohibition of investments associated with activities such as alcohol consumption and tobacco use . However, Shariah law allows investment in almost all property types as long as there is no direct connection between project financing and the operation of the completed development . This key aspect enables adherence to the ethical regulations of Shariah law .
Walton Global and Shariah Investments: Developing Faith-Aligned Real Estate Projects
Ahmed Haggag, the newly appointed senior vice president of Walton Global’s Shariah Investments division, highlights the natural alignment between Shariah principles and real estate development and trading of physical assets . Walton secures land, develops properties and divests them, ensuring that investors have no direct connection to the operation of the completed property . Through interest-free financing and risk-sharing Walton creates Shariah-compliant projects, endorsed by the Islamic Finance Advisory Board . This approach enables faith-based investors to participate in real estate projects including hotels, while preserving compliance with Shariah law .
Growing Trend: More Firms Embrace Shariah-Compliant Real Estate Investment Opportunities
Walton is not alone in catering to the rising demand for Shariah-compliant real estate investment opportunities . Mamluk Halal Investment recently launched as a Shariah-compliant passive real estate investment fund . The fund offers fully passive investment offerings, utilizing an Islamic financing structure that incorporates a Wakala model . Global investment firm Pentavirate also entered the market with a $100 million Sukuk issuance collateralized by U .S . commercial real estate . This is part of a larger $2 billion program designed to provide global investors with access to stable Shariah-compliant assets in the United States .
As the Muslim population continues to grow worldwide accompanied by considerable wealth in Middle Eastern countries the demand for Shariah-compliant real estate investment opportunities is on the rise . The U .S . real estate market as a popular destination for cross-border investors has the potential to cater to this demand and make available investment options adhering to Shariah regulations .
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