Many people, including many Muslims, associate the word Halal with food. However, as time goes by, more and more Muslims are asking themselves whether their investments are Halal. This is also the case when considering real estate investment. A Halal real estate investment is one that does not condone any Haram activity or trade.
Finally, through halal real estate investments, investors are offered the opportunity to earn investment income in a halal manner. In addition, it also allows investors to be part of real estate projects that can benefit the community and the wider economy (for example, by investing in the Shariah-compliant real estate crowdfunding platform Ethis Crowd). The real estate sector has an unprecedented reach internationally, and the continued growth of the halal real estate sector is a testament to the success of halal real estate investments thus far. It invests in the real estate sector by financing small investors (Lead Buyers) who are looking to own property without incurring debt.
Our patent-pending model helps small investors while providing our shareholders with superior returns. Wealthface Limited offers traditional securities and does not intend to engage a Shariah advisor or obtain a fatwa in relation to Shariah screened securities. Wealthface does not have FSRA endorsement for Islamic windows. Clients should be aware that Shariah-screened securities may involve additional risks and costs.
REITs offer investors a way to invest in a portfolio of properties without having to buy them outright. Investment advisors often recommend diversifying the portfolio between high and low risk investments. The problem with debt-based crowdfunding is that investors expect borrowers to pay them back in full, including interest. If a real estate asset is used primarily for haram purposes, for example a casino, an office block occupied by a traditional lending institution or prostitution activities, it will not be an acceptable form of investment.
If it strictly adheres to Shariah, there is no reason not to invest in real estate. Depending on the structure of the investment he has chosen, zakat will be calculated according to his intention at the time of making the initial investment. Therefore, for the Muslim investor, it is going to be the same approach, and ensure that each and every investment contract is in line with Shariah. For example, in halal real estate investments, certain transactions and activities that are considered contrary to Shariah are prohibited.
Crowdfunding platforms are online platforms that connect people seeking equity or debt financing with investors. Through these efforts undertaken by Shariah scholars, it will also ensure that investments are not involved in any activities that may cause potential harm to investors. By developing and investing in halal real estate projects, investors are indirectly helping the economy and the community at large. In the case of mortgage REITs, where the business simply benefits from the difference in interest rates between short and long-term debt, their business is definitely interest-dependent and therefore haram to invest in them, in my opinion.
As for equity-based crowdfunding, the Muslim investor must ensure that the same kind of monitoring is carried out as mentioned above for REITs.