Although it now seems to have dropped off the radar, there was once a time when books on Shariah law, the Islamic legal system, were being published one after another in the context of rising crude oil prices. Lately in Asia and the Middle East, there have been continuous efforts to establish Shariah-based REITs.

Dubai Islamic Bank recently revealed that it will launch Emirates REIT in cooperation with a French firm. It will be the first REIT based in the United Arab Emirates. While the “Dubai shock” is still fresh in the public’s memory, this project holds implications of stimulating the stagnant real estate market of the area.
 
Meanwhile, there are already several Shariah-based REITs operating in Malaysia. In Singapore, a Shariah-based REIT with the long title of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust was listed this past November. It invests in Singapore’s R&D centers and logistics facilities and says that at least 95% of its revenues will be secured from Shariah-compliant tenants.

What exactly is a Shariah-based firm? Since 2007, Standard & Poor’s and the Tokyo Stock Exchange have been providing the S&P/TOPIX 150 Shariah Index, which comprises only of Shariah-compliant firms targeting investors in Islamic countries. According to materials on the Index, the types of businesses that are in conflict with Shariah are those related to advertising, media, alcohol, finance, gambling, pork, pornography, tobacco and the exchange of gold and silver.

Hence Nikkei BP, which is a publishing media, would not be able to move into properties owned by the above-mentioned REITs. Although this is by no means an impediment, I am curious as to why our business is not considered to be compatible with Islamic law.

(Kazuhiro Mikami)