» REIT and I-REIT

The REIT is one of the forms established to invest money effectively in real-estates. We shall highlight the REIT and compare it to I-REIT, and then we shall present the current situation of I-REIT in Malaysia, Singapore, and Dubai.
REIT stands for real-estate investment trust which is defined as: A corporation or trust that uses the pooled capital of many investors to purchase and manage income property (equity REIT) and/or mortgage loans (mortgage REIT). REITs are traded on major exchanges just like stocks.

I-REIT stands for Islamic real-estate investment trust and in general it means: a collective investment scheme in real estate, in which the tenant(s) operates permissible activities according to the Sharia.
In 2006, the number of REITs in Asia reached 55 with a combined value of US$35 billion, due to the rapid growth of property development.
In Malaysia, the REITs were developed into I-REITs that comply with Islamic laws. The Securities Commission issued I-REITs guidelines in 2005; it was the first I-REITS guideline ever issued.
Fundamentally, there is not much difference between REITs and I-REITs. The Major difference is that the Islamic REIT tenants in a property acquired must operate in businesses that comply with Shari’a principles and the funds must be administered according to Shari’a.

It is not required that the trustee must have a certain faith or belief as long as he applies the Shari’a principles while managing the I-REIT.
The insurance must be Islamic, if not available; we can use the conventional under the permission of Shari’a board.
In Singapore and Dubai International Financial Centre, the regulators did not issue a framework for I-REITs and it is to be determined by the Shari’a board of I-REITs.
The Shari’a board monitors and reviews the following areas:

1. Rental of real-estate.
2. Investment, Deposit, & Financing.
3. Insurance and Takaful.
4. Risk management.

Investing in REITs is a low risk investment and it also bears other benefits for the investor. Among these benefits, REITs distribute income in form of dividends as this is a requirement for them to enjoy special tax incentives.
REITs also allow investors with only a few thousand dollars to diversify their holdings geographically and in various property specializations.
REITs give investors the opportunity to invest in professionally managed properties.

On the other hand, REITs in some jurisdictions do not enjoy tax facilities. Also, risks related to properties, management, tenancy and sub tenancy, external issues and etc may affect the performance of I-REITs.
In my opinion, the I-REIT is the most suitable solution for investing the properties of Egyptian Waqfs (endowments) as it mainly comprises of land properties and suffers from poor management practices.
To conclude, the I-REIT has the potentials to turn into a viable investment form though certain issues need to be treated such as forming a universally accepted regulatory framework, Shari’a consensus on asset types and taxation benefits, and double tax treaties.