SHARIA’A COMPLIANT PROPERTY FINANCING Jonathan Lawrence Partner Kirkpatrick & Lockhart Nicholson Graham LLP 110 Cannon Street London EC4N 6AR Direct Phone: +44(0)

The Opportunity EUR 2.6 billion invested in Islamic compliant property transactions in 2004 £10 billion invested by Middle Eastern investors in European real estate since % has been Islamic Over 25% of total cross-border investments into European property are Islamic Source: DTZ Corporate Finance

Principles Prohibition on charging interest Risks are shared fairly between borrowers and lender Provide assistance to society No uncertainty Prohibited investments - property use

Concepts Sharia’a Riba Ijara Murabaha Istisna’a

Classic Ijara Structure Islamic Investors Property Occupational Tenants Islamic Fund owns 100% of occupational leases invest in buys Islamic Lessee Bank Ijara lease

Ijara Lease Provisions Linking rental payments and interest Default interest Insurance and maintenance Sharia’a board clearance

Hybrid Ijara Structure: Bank which does not want to own property Non-Islamic Charity Property owns 100% of buys owns 100% of Bank Parent Company Non-Islamic Borrower/Lessor Property/Rental Income Security Share security Interest bearing loan Islamic Investors Islamic Fund Occupational Tenants owns 100% ofinvest in owns 100% of Ijara Lease rent Islamic Lessee occupational leases Security