Halal Investments in Property – a viable option?
As part of our ongoing effort in bringing alternative products to the market and to satisfy our client request, we are intrigued by the gap in the market that is currently unfulfilled when it comes to halal investments or shariah compliant investments. Hopefully, by the middle of 2014, we will be in a position to release the social investments which support and aid children and adults who need additional social support and we have been advised by our investment partners, that this ethical investment should fall within the remit of what are commonly known as halal investments.
Before we continue with this article, we would like to point out that we are in no way stating that this is a halal endorsed investment, nor has this product been approved by any global Islamic finance forum. We are just stating, from our limited understanding and discussions with our Muslim clients, how this UK property investment fits the profile of a halal investment.
What halal investment options currently exist?
Firstly, it should be noted that approximately 24% of the world is of Muslim background. When it comes to the UK and USA, we see an ever increasing number of Muslim investors and consumers with disposable income and this major target profile is currently being underserved in many markets and the property investment market is no different. Halal shares, shariah based investments and shariah investment funds are a current option to Muslim investors, but the disadvantage to these investments is the lack of control that the investor has. The Islamic Bank of Britain has struggled for a number of years to come up with a product that works and fits the ‘shariah compliant’ definition and even its latest range of buy-to-let products have come under scrutiny. It really is a difficult definition to get consensus on halal investments, but there underlies two principle foundations of which most scholars will agree on:
- A shariah based investment rules out any involvement of interest – usury or ‘riba’ in Islamic terms. So a savings account which pays out interest is considered haram and bonds are also ruled out as interest is effectively being paid on the debt.
- Any industry which involves products which are termed as haraam or not permissible according to Islamic practices. For example, investing in companies that are involved in the production or sale of alcohol is obviously haraam and will not be permissible.
It must be stressed that Halal Investments or Shariah compliant investments can get very technical and is open to interpretation. This must be a reason why the products currently available are under developed and the market is underserved.
Are we claiming to offer halal investments?
Obviously, we will need to obtain specialist advice on whether we can attach the ‘halal investing’ label onto our social investment which caters for children, but we do believe it ticks the boxes when it comes to a halal investment opportunity based on the two following simple grounds:
- It is a product that intends on acting for the greater good and is a vehicle for social inclusion. The fact that children are a key client, and in some cases, children that require social care due to parental issues further underlines the Islamic values on caring for children, especially those that are orphaned – an important area for Muslims.
- Investors will be able to invest from £20,000 without the need for any involvement in interest or lending. This lower figure will also make investing more accessible for a lot more people.
Again, this post is something that requires a lot more depth and thought process attached to it before we can make claims that it is a halal investment option or before we can even begin to tell clients how to invest in shariah investments, but we thought we’d get this out there to let our Muslim clients (and non-Muslim too) of the nature of the products we will be making available.
Please excuse us if we’ve made any glaring mistakes as the halal investments are not our forte. If there is something in this article you would like to correct or to discuss, please feel free to get in touch using the comments box below.