REITs (Real Estate Investment Trusts)
Shariah-compliant REIT structures
Islamic REITs (i-REITs) are permissible when the underlying properties are Shariah-compliant (not leased to haram businesses) and the REIT's financing is through Islamic instruments. Malaysia has the world's first regulatory framework for Islamic REITs.
Full Ruling
An Islamic REIT is permissible under these conditions: (1) The majority of properties held must not be rented to tenants whose primary business is impermissible (e.g., conventional banking, alcohol, gambling). (2) Non-compliant tenants' rental income must not exceed 20% of total rental income. (3) All financing at the REIT level must be through Islamic instruments (sukuk, Islamic financing). (4) The Shariah Committee must approve all acquisitions and financing. (5) Annual Shariah audit is required.
Rationale & Reasoning
Real estate ownership and leasing (ijarah) are fundamentally permissible. The REIT structure is essentially a collective investment in ijarah contracts. Shariah concerns relate to the nature of tenants and the REIT's own financing.
Rule Basis (Daleel)
- 01Permissibility of ijarah (lease)
- 02Collective investment in halal assets
- 03SC Malaysia i-REIT Guidelines
Conditions for Permissibility
- ✓Properties not leased primarily to haram businesses
- ✓Non-compliant rental income ≤ 20% of total
- ✓REIT-level financing via Islamic instruments only
- ✓Shariah Committee oversight
Citations & Sources
Securities Commission Malaysia – Shariah Screening Methodology 2023
Securities Commission Malaysia · 2023
Ref: SC/2023/SSM