Islamic Financing Spurring Growth in London
CAIRO — A £1bn Shari`ah- compliant loan will turn a landmark military property at the heart of London into a luxurious residential compound, a groundbreaking project for Islamic finance dealings with real estate in Britain.
“This is the most important redevelopment scheme in London in the last 50 years,” Christian Candy, co-owner and founder of the property developer firm (CPC), told the Guardian on Monday, March 3.
Candy’s firm will use a £1.3bn loan from the Qatari Investment Fund to transform the historic Chelsea barracks in central London into a residential compound. Under the scheme, the 12.8 acre of concrete army buildings in the ritzy Chelsea neighborhood will turn into luxury flats, a hotel and health spas, with the help of Qatari Diar, the giant real estate company and the property arm of the fund. The 3.5-year-loan will comply with Islamic finance rules as it is structured in an Ijara structure, or lease agreement, whereby rent is paid on the borrowings, rather than interest payments.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships. Islam forbids Muslims from receiving or paying interest on loans. Islamic bankers and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
The project is seen as breaking new ground for Islamic finance in Britain. Developers say the deal would be the largest Shari`ah-compliant financing on a property in the UK.
“The financial structure developed here has allowed us to deliver a truly innovative financing solution for the global real estate sector,” said Patrick Chenel, chief financial officer for Qatari Diar.
“We have broken new ground with our advisers by creating and setting up Islamic financing of a scale not seen before in a major real estate acquisition in [the] UK.”
Mark Payne, partner at the international law firm Clifford Chance which structured the deal, agrees.
“This will open people’s eyes to the possibilities for Islamic financing to help business in the UK,” he told the Financial Times.
He believes the deal will show that Islamic financing is “possible on a wide range of assets.
“We will certainly see more of these types of deals.”
Islamic finance is one of the fastest growing sectors in the global financial industry. Beginning almost three decades ago, it has made substantial growth and attracted the attention of investors and bankers across the world.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.
Britain, home to nearly two million Muslims, is seeking to become a hub for Islamic finance. It is already home to the world’s first qualification center — the Islamic Finance Qualification (IFQ) — which covers all aspects of the industry.
(Reported on IslamOnline.net)
It’s great to hear about Islamic financing being used for these kinds of deals (and rather ironic that the developer’s name is Christian).
It seems most of the Islamic financing deals I hear about are huge projects like this, which is good as far as it goes.
Insha’Allah I’d like to hear about this kind of Islamic business financing becoming available to smaller entrepreneurs as well, for example in the $50K to $500K range.