Islamic Fund Management
52
Table 3.3: Salient Terms of Malaysia’s Guidelines on Islamic REITs
Salient Terms
Tenants An Islamic REIT may invest in real estate where:
1. All of its tenants carry out fully Shariah-compliant activities; or
2. Some of the tenants carry out Shariah non-compliant activities, provided the
percentage of rental received from all such activities (Shariah non-compliant
rental) is less than 20% of the total turnover of the Islamic REIT.
Non-Compliant
Rental
Threshold
Where a tenant’s activities comprise both Shariah-compliant and Shariah non-
compliant activities, the following requirements will apply to ensure that the
Shariah non-compliant rental is below the 20% threshold:
1. The calculation of the Shariah non-compliant rental must be based on the
percentage of area occupied for Shariah non-compliant activities to the total
area occupied by such tenants.
2. Notwithstanding item (1) above, for activities that do not involve the use of
space, such as service-based activities, the Shariah adviser may apply ijtihad
(intellectual reasoning) when assessing the Shariah non-compliant rental for
such tenants.
Source: Securities Commission Malaysia (2018)
Figure 3.7: Basic Structure of an Islamic REIT
Direct
ownership
of properties
Net property income
Units subscribed in IPO
and/or acquired in the
open market
Dividend
distribution
Acts on behalf of unit
holders
Trustee fees
INVESTOR OR
UNITHOLDERS
TRUSTEE
MANAGEMENT
COMPANY
SHARIAH ADVISORY
COMMITTEE
ISLAMIC REIT
Management
services
Governance for Shariah
compliance
PROPERTIES
Management fees
Appointment of
trustee
PROPERTYMANAGER
Property
management
services
Property
management
fees
Source: RAM
5. ETFs
ETFs are a type of mutual fund that combines the features of an open-ended fund and a stock.
Units are issued directly to investors when the scheme is launched. The units are listed and
traded on a stock exchange like a stock. Transactions are done through the exchange’s brokers.
Investors need a broking account and an account related to buying/selling securities. Units
purchased are credited to the demat account of the investor. The prices of the ETF units on the