Shariah law property deals on the rise in Scotland

Shariah-compliant property investment opportunities in Scotland are being pitched as an alternative to the “cooling” London market as part of a push by the Islamic Finance Council UK (UKIFC).

Omar Shaikh pointed to a marked increase in the number of Scottish Shariah-compliant deals.

The council has partnered with major financiers and advisers to create a brochure encouraging investors to seek deals north of the Border under the Islamic financial system.

Based on Shariah, the law of Islam, the Islamic system views social benefit as a key consideration for property financing, along with the avoidance of interest.

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There have been more than £250 million worth of Shariah-compliant property investment deals in Scotland in the last five years, with returns on Scottish commercial property exceeding the UK average in 2018.

Recent examples include Atlantic Quay 1, a refurbished Grade A office investment which was acquired in 2018 by Bank of London and the Middle East in partnership with Darin Partners in a £55m deal.

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Produced in conjunction with BDO, Gatehouse Bank, Ocorian and Shepherd + Wedderburn, the brochure shines a light on factors such as the Scottish Government’s proactive approach to foreign investment, Scotland’s technically skilled workforce and the country’s natural habitat.

Omar Shaikh of the UKIFC said: “There has been a marked increase in the number of Scottish Shariah-compliant deals completed in recent years in distribution centres, office blocks and student accommodation, amongst others.

“Investors have been seeking better yields than what is on offer in the London region. There are no legal barriers as the structures used to accommodate Shariah-compliant property transactions offer the same protection as those in England.

“Despite the current coronavirus crisis which is affecting economies across the world, over the medium-term the fundamentals of the Scottish market continue to present an attractive investment proposition.”

Ed Peters, tax director with BDO, added: “Over the last decade, a key area of specialism for BDO has been advising Shariah-compliant investors looking to invest in real estate outside their home jurisdictions.

“This investment has been increasingly focused outside of London’s saturated market, and more on areas which provide greater value, such as Scotland, where we have seen a number of clients making significant investments in grade-A assets such as Atlantic Quay 1 and the Edinburgh headquarters of Scottish Gas.

“We expect to see this trend continue once the impact of coronavirus eases, as investors look to geographically diversify risk and secure value.”

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