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Prime London PRS fund to target Sharia-conscious investors

Asset manager, LCP, is set to launch a new Sharia-compliant fund with a view to investing in the mainstream private rented sector (PRS) in prime central London.

Demand for UK property from Sharia-conscious investors in the MENA region has soared since the outcome of the EU vote as overseas buyers seek to take advantage of the sharp decline in the pound’s value and price reductions, and LCP is hoping to tap in to this market by offering a Sharia-compliant option.

The fund, LCA IV, will target a total return on investment of around 100% including annual interim distributions of 5% from year three. It will selectively acquire properties with added value potential across all the prime postcodes. These will undergo a full refurbishment to appeal to the mainstream rental sector. The minimum investment is £100,000.

LCA IV also offers some tax advantages for investors, not available if they ‘go-it-alone’ and invest directly. It will not be subject to the forthcoming reduction in mortgage interest relief, nor the additional rate stamp duty. For the offshore investor, it is exempted from both non-resident capital gains tax and the forthcoming look-through non-dom inheritance tax.

“LCP are providing access to a unique and attractive asset class whilst ensuring the fund remains within the bounds of Sharia statute,” said Faizal Karbani, CEO of Simply Ethical.

“As a bricks and mortar product, often preferred by Muslim investors, the fund is a perfect recipe for us. The projected returns are excellent and LCP provide a strong track record,” he added.

Having already invested in the UK property market through initiatives such as the government’s Sovereign Sukuk, LCP report that many investors are now seeking other Sharia-compliant residential funds in the UK property sector to enable them to diversify their portfolios.

LCP has already seen strong demand with Sharia-conscious investors providing 17% of the total investment in their funds. This far outstrips global financial markets in general where Sharia-compliant assets make up just 1%. 

Currently, demand for LCP’s residential property products is evenly split between corporate investors/family offices (52%) and individual HNW investors (48%).

In line with the Sharia sector in general, the majority of interest in LCP’s products, at 63%, has come from international investors in the traditional heartlands of Islamic Finance. Investors from the MENA region made up the largest proportion of Sharia investors at 48%. Some 10% of investment also came from Malaysia, a well-developed Islamic financial region.

Keith Leach, chief commercial officer for Al Rayan Bank, said: “Two key objectives for Al Rayan Bank have been to provide bespoke Sharia-compliant investment opportunities and to expand our presence in the real estate sector – particularly in prime central London, a favourite of both our Middle Eastern and British clients.

“We are keen to strengthen our product range by bringing new, innovative products to our clients, so exploring the residential space was an obvious next step. We believe this is an exciting opportunity for investors.”

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