- 17% of total investment in LCP’s Prime London Residential funds, structured to be Sharia-compliant, has come from Sharia conscious investors.
- This outstrips the global financial market where Sharia-compliant investment makes up just 1%.
- Demand for Sharia-compliant residential products is evenly split between corporate investors/ family offices (52%) and individual HNW investors (48%).
- 63% of Sharia-compliant investment is from international investors in the traditional heartlands of Islamic Finance.
- The MENA region makes up the largest proportion of Sharia investors at 48%, with 10% of Sharia investment coming from Malaysia.
- 38% of Sharia investment is from British Muslims.
- The average individual investment from Sharia-compliant investors is double that of non-Sharia investors.
- The average individual investment from MENA investors is 57% greater than the overall average and 4.5 times higher than from British Muslim.
- For Malaysian investors, the average individual investment was 7% higher and 3 times higher than from British Muslim.
- Weak sterling and the search for safe asset-backed investment is fuelling demand from Sharia conscious investors.
The demand for Sharia-compliant investment solutions in UK real estate has grown significantly since the launch of the Government’s Sovereign Sukuk, investing in commercial property, 3 years ago. Finance from the Gulf and Malaysia has played a significant role in real estate developments in the UK, such as The Shard, Battersea Power Station, the Olympic Village and Chelsea Barracks. Now, Sharia conscious investors are making a clear call for products within the sector as they increasingly look at ways of diversifying their portfolios. This is particularly true now as the pound remains weak against other currencies, especially for those which are dollar denominated. Global economic and political uncertainty, heightened by the US presidential election, is providing added incentive for Sharia investors to look at safe haven investments such as London property.
London Central Portfolio (LCP) was the first company in the UK to offer Sharia-compliant residential funds, which invest in Central London’s buoyant Private Rented Sector. They have already seen strong demand with Sharia-conscious investors providing 17% of the total investment in their funds. This far outstrips global financial markets in general where Sharia-compliant assets make up just 1%. Currently, demand for LCP’s residential real estate products is evenly split between corporate investors/family offices (52%) and individual HNW investors (48%).
In line with the Sharia sector in general, the majority of interest in LCP’s products, at 63%, has come from international investors in the traditional heartlands of Islamic Finance. Investors from the MENA region made up the largest proportion of Sharia investors at 48%. 10% of investment also came from Malaysia, a well-developed Islamic financial region.
International investors, however, were not alone in their search for accessible Sharia-compliant real estate products. With its attractive Central London residential focus and LCP’s strong relationships with specialist Islamic Finance IFAs in the UK, the company also saw 38% of Sharia investment coming from British Muslims.
With limited Islamic Finance products available in the space and strong projected returns in excess of 10% per annum, the average individual investment from Sharia-compliant investors was double that of non-Sharia investors. Individually, investors from MENA and Malaysia deployed the largest sums of capital into LCP’s funds.
From the MENA region, the average individual investment was 57% higher than the total average and 4.5 times higher than was invested by British Muslims. For Malaysian investors, it was 7% higher and 3 times higher than was invested by British Muslims. For UK Sharia-compliant shareholders, often subscribing through tax-efficient savings schemes such as Islamic SIPPs and ISAs, investment was 65% lower than average.
LCP is soon to launch London Central Apartments IV (LCA IV) which will offer a Sharia-compliant option. Investing in the mainstream Private Rented Sector (PRS) in Prime Central London (PCL). LCA IV will target a total return on investment of around 100% including annual interim distributions of 5% from year 3. It will selectively acquire properties with added value potential across all the prime postcodes. These will undergo a full refurbishment to appeal to the mainstream rental sector. The minimum investment is £100,000 (or less subject to eligibility).
As well as providing buying power and diversification into this asset class, LCA IV offers significant tax advantages for investors, not available if they ‘go-it-alone’ and invest directly. It will not be subject to the forthcoming reduction in mortgage interest relief, nor the additional rate Stamp Duty. For the offshore investor, it is exempted from both non-resident CGT and the forthcoming look-through non-dom inheritance tax.
Keith Leach, Chief Commercial Officer for Al Rayan Bank comments: “Two key objectives for Al Rayan Bank have been to provide bespoke Sharia-compliant investment opportunities and to expand our presence in the real estate sector – particularly in Prime Central London, a favourite of both our Middle Eastern and British clients. We are keen to strengthen our product range by bringing new, innovative products to our clients, so exploring the residential space was an obvious next step. We believe this is an exciting opportunity for investors.”
FaizalKarbani, CEO of Simply Ethical, adds: “LCP are providing access to a unique and attractive asset class whilst ensuring the fund remains within the bounds of Sharia statute. As a bricks and mortar product, often preferred by Muslim investors, the fund is a perfect recipe for us. The projected returns are excellent and LCP provide a strong track record.”