Firm advises on first Shari’ah compliant real estate financing

A major firm has led the first Australia Shari’ah compliant transaction and says Australia is seeing a growing demand.

A team lead by Ashurst finance partner Jamie Ng has completed the first Shari’ah compliant murabaha in Australia.

The structured financing arrangement funded by ANZ enabled a commodity transaction to finance an interest in a Melbourne property at 747 Collins St, by one of Malaysia’s largest pension funds, Tabung Haji.  Ashurst acted for investment manager CIMB-TrustCapital, as well as Tabung Haji on the deal.

“Shari'ah compliant financings can be complex and involve parallel consideration of various Shari'ah structuring, legal and taxation issues to produce an outcome that is not only viable, but which is commercially and legally robust,” Ng told Australasian Lawyer.

The demand for Shari’ah compliant financing, particularly in the real estate sector, is a growing trend driven by both Australian and off shore investors, according to Ng.

“We are seeing a considerable degree of interest in Shari'ah compliant on-shore financing products, and we have fielded an influx of enquiries from offshore investment vehicles out of the Middle East and Asia wanting to know more about the structures available in Australia,” he said.

“There is also some rejuvenated interest in Australian financial institutions tapping offshore Islamic financing markets for funding and also as a market to syndicate into.

“So we are seeing a convergence in the development of financing structures in order to satisfy demand from bank clients who want onshore funding solutions, and, these products may then result in portfolios which the banks can then use to back Islamic capital markets fund raising.”

While the financing structure needed to align with Shari’ah principles, the governing law of the relevant transaction documents is the law of the relevant jurisdiction in which the transaction took place.

“Understanding the guiding principles is the first step in providing structured financing solutions to enable the transaction to proceed,” Ng said.

“Australian lenders will have their own regulatory and operational considerations which will need to be taken into account.  So, strong collaboration with the lenders, Scholars and legal, taxation and financial advisors is key to a successful transaction.”
 
The Ashurst team was comprised of London based partner Abradat Kamalpou, who heads the firm’s Islamic finance practice.

“Having structured and executed market-first Shari'ah compliant financing solutions for Australia, our team possesses a strong understanding of the issues that impact Islamic finance in this country and the mechanisms to address any challenges,” Ng said.

“We have built a strong dialogue with major players in this space – funds, investors and sponsors – and offer innovative but tailored solutions.”

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