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Islamic finance and real estate investment

19 July 2019

This briefing looks at what Jersey has to offer to real estate investors wishing to structure their real estate investments in accordance with the principals of Sharia (Islamic law), a code of conduct that guides all aspects of Muslim life.

Jersey is one of the world's leading international finance centres, and has been at the forefront of global finance for more than 50 years. Independent, with its own government and judicial system based on common law principles, Jersey was one of the first jurisdictions to regulate those involved in the establishment and administration of real estate structures, providing a guarantee of standards and protection for investors. Jersey also adheres to international standards of financial regulation and reporting, with independent assessors from bodies such as the OECD, World Bank and the IMF all acknowledging Jersey as being compliant and co-operative in relation to financial regulation.

Jersey is a jurisdiction of choice for pension funds, institutions, sovereign wealth funds, fund managers and private wealth investors in real estate. More recently, Jersey has also become an innovative and market leading jurisdiction in the field of Islamic finance as an alternative to conventional western financing. With a large number of existing clients, Bedell Cristin's highly skilled workforce has developed significant expertise in all areas of Sharia law.

Sharia financing options

Advising on the establishment of Sharia-compliant investment solutions now comprises a significant part of Bedell Cristin's business.

In order to support some the core principles of Islam, Sharia law prohibits business transactions based on, among other things (1) interest (or riba) on the basis that it allows the owner of wealth to receive a return without making any effort and with the borrower bearing all of the risk (2) uncertainty (or ghahar) since it suggests an element of deceit if one or both parties are uncertain of precise terms (3) gambling (or maysir and qimar) since it allows a person to benefit from chance rather than by effort and because there is no certainty how a gamble will pay off and (4) activities which could be considered harmful to society (haram) or which relate to prohibited items (halal) such as matters involving alcohol, prostitution, pornography, tobacco or pork.

Commonly, the main Sharia-compliant techniques used in Jersey to address the above issues are as follows:

Murabaha – in this cost plus contract, an Islamic financial institution sells a commodity to a purchaser for its cost price plus a defined profit. Both parties know the cost and profit in advance and the purchaser/borrower pays the financial institution back by way of deferred payments.

Sukuk – colloquially referred to as Islamic bonds, sukuk are Sharia-compliant fixed income instruments. They differ from bonds in that a sukuk represents a beneficial interest of the holder/investor in the underlying funding instrument rather than a straightforward debt obligation. A sukuk holder is entitled to a pro rata share of any gains generated by the funding arrangement and, at a future date, the return of such holder’s original capital.

Ijara – the transfer of an asset to another person in exchange for a rent claimed from him (i.e. akin to a lease).

Mushakara – a joint arrangement in which both parties provide investment capital, entrepreneurial skills and labour and both share the profit and/or loss of the activity.

Mudaraba – in this contractual arrangement, one party gives money to another party to invest in a business or economic activity. Both parties share any profit on a pre-agreed ratio but only the investor loses money if the investment fails.

Salam – a forward looking contract whereby a purchaser/borrower (or an Islamic financial institution on behalf of the purchaser) pays for goods in full in advance and the goods are delivered at a future date.

Istisna – a forward looking contract whereby an Islamic financial institution agrees to buy a project that is under construction on behalf of a purchaser/borrower and where such project is delivered to the purchaser/borrower at a future date.

Qard hasan – interest free loans.

Structuring options

Jersey offers a variety of options for those structuring investment in real estate, including via property funds, REITs, investment syndicates, joint ventures and proprietary holding structures.

The options for real estate vehicles include unit trusts, limited partnerships and companies, all of which offer highly flexible solutions and are supported by a modern, sophisticated, legislative framework.

Sharia-compliant financing arrangements can be, and increasingly are, utilised in any of the above structures (sometimes in conjunction with carefully implemented conventional financing).

Regulatory regimes

There is a choice of regulatory regimes available in Jersey, providing optionality as to the level of regulation applied to the vehicle. Whilst service providers such as administrators, trustees and custodians are regulated, and higher regulatory standards apply to funds marketed to the general public, regulation-free or regulation-light regimes are available for private structures, or for structures that are only marketed to sophisticated or institutional investors.

Regulation of sukuk issues and other Islamic products is undertaken by the Jersey Financial Services Commission. The Commission is familiar with Islamic products, which are treated like any other issue of securities. Furthermore, whereas some jurisdictions have found it necessary to amend their legislation to permit Islamic products, this is not the case in Jersey whose laws are sufficiently broad to permit the issue of all types of Islamic instruments.


Sukuk issued by Jersey SPVs can be listed on any relevant stock exchange in order to meet investor requirements and The International Stock Exchange ('TISE') based in Guernsey is an attractive and increasingly popular option for listing sukuk. As a Recognised Stock Exchange for HM Revenue & Customs purposes, sukuk and other instruments listed on TISE can qualify as quoted Eurobonds for UK tax purposes.


Jersey offers a tax-neutral environment, with no corporation tax, capital gains tax, VAT, withholding taxes or stamp duty on the transfer of interests in real estate structures. Taxes will be paid in the country where real estate is held, and by investors, in accordance with the tax rules in the respective jurisdictions, but using Jersey structures means that there is no additional layer of tax and thus the same profits are not taxed twice. Both zero tax and 'tax transparent' vehicles are available, and tax neutrality is not dependent on the complexity of international tax treaties.

Even with the introduction of the proposed changes to the UK's capital gains tax provisions, it is expected that Jersey will continue to be an attractive jurisdiction in which to hold real estate.

From April 2019, whilst gains made by non-residents on all types of UK property will become, for the first time, subject to UK tax, the accommodation provided within the new rules for non-UK structures, will allow certain Jersey structures (such as Jersey property unit trusts ('JPUTs')) to avoid paying multiple levels of tax. JPUTs are generally structured so as to be tax transparent and have the benefit that no transfer taxes are payable on the transfer of units.


Jersey remains at the forefront of global finance and continues to offer an excellent platform for wealth management and real estate investment.

The flexibility of Jersey's laws and structuring options, combined with the proactive and progressive approach of its regulator, has cemented Jersey's position as a market leading jurisdiction in the field of both real estate and Islamic finance.

Bedell Cristin's wealth of experience in both areas ensures clients receive ethical, accurate and commercial advice.