Malaysia issues world’s first guidelines for Islamic REITs SC sets global benchmark for Islamic REITs development

The Securities Commission (SC) today issued Guidelines for Islamic Real Estate Investment Trusts (Islamic REITs Guidelines) to facilitate further development of new Islamic capital market products, making Malaysia the first jurisdiction in the global Islamic financial sector to issue such guidelines and setting a global benchmark for the development of Islamic real estate investment trusts (Islamic REITs).

The Minister of Finance II had earlier on 17 November 2005 announced that the guidelines were forthcoming from the SC.

This latest achievement further enhances Malaysia’s lead role in the development of the Islamic capital market amongst the international financial community , and will further promote and accelerate the growth of a competitive Islamic capital market in Malaysia .

This development also enhances the Islamic financial market as a complement to conventional forms of investments. Towards this end, the Islamic REITs Guidelines complement the SC’s Guidelines on Real Estate Investment Trusts that were issued on 3 January 2005.

The thrust of these latest guidelines is to provide a new investment opportunity for those who wish to invest in real estate through Syariah compliant capital market instruments. The Islamic REITs Guidelines facilitate the creation of a new asset class for investors and allow fund managers to further diversify their investment sources and portfolios. They also provide international investors seeking syariah compliant instruments an opportunity to invest in Malaysian real property without the need for direct ownership of such assets.

Syariah compliance criteria are provided in the Guidelines to guide management companies in their activities relating to Islamic REITs, including the types of Syariah permissible and non-permissible rental and investment activities of such a fund.

The Islamic REITs Guidelines have been approved by the SC’s Syariah Advisory Council and is a result of the SC’s continuous research on and assessment of new instruments to promote the structuring of capital market instruments that are in accordance with the approved Syariah framework.

The introduction of the Islamic REITs Guidelines is consistent with the Capital Market Masterplan’s recommendation to facilitate the development of a wider range of Islamic collective investment schemes, given the sizeable pool of global Islamic funds.

The Guidelines and a set of frequently asked questions (FAQs) are available on the SC website here.