Demand Rises for Shariah-Compliant Real Estate Investment Opportunities

The world hit a notable milestone last month in April, as the global population of Muslims surpassed 2 billion. In the United States, Pew research predicted years ago that Muslims would become the second-largest religious group in the country by 2040. As the Muslim population goes on the rise around the world, so too does Islamic investment activity, but Muslims are restricted from certain types of investment that don’t comply with their doctrine of Shariah law. 

Muslim investors have a great deal of dry powder to invest after the global COVID-19 health crisis. But even before the pandemic emerged, the Islamic finance industry had been on a meteoric rise and today this Shariah-compliant financing system accounts for more than $2 trillion in financial assets, predominantly in the Middle East and Malaysia. And with the Islamic finance industry on track to grow by 10 to 12 percent annually, the timing is right for the U.S. real estate industry to put its Shariah-compliant offerings on full display.

On the face of it, it may appear that Shariah-compliant investment poses a major conflict with certain types of commercial real estate. After all, Shariah law prohibits participation in investments with connections to such activities as alcohol consumption and tobacco use, which, at first glance, would appear to take property types like retail restaurants and hotels out of contention, and even prevent involvement in properties that offer alcohol-serving eateries, tobacco sales, or even smoking areas. Contrary to popular belief, Shariah law does allow for investment in almost

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