A new report from Citi Private Bank (CPB) exposes the need for many Western real estate players to become more adept at dealing with Islamic finance procedures.
The bank says its assets under management across all property classes expanded from $423 billion (Dh1.55 trillion) in 400 funds in 2003-2004 to $41 in 700 funds in 2007-2008 – the figure which has remained more orless constant since then, thanks to the downturn in global markets.
The US-based bank highlights the inability of Western real estate sectors to have knowledge or experience when putting its funds to the appropriate Shariah boards of scholars for approval or rejection of their plans.
Youssef Affany, a CPB Managing Director, says the experience and knowledge should improve rapidly if Western financial and real estate players are to benefit from what he calls "pockets of excellence and pioneering investors" in countries such as the UAE, Bahrain, Saudi Arabia, Pakistan and Malaysia.
It is perhaps not surprising that this is the case. As I have consistently argued, the tectonic plates of the property world are shifting from the West to other regions, including the Middle East.
It is taking the West some time to realise this and, until they feel they have to act, Western players are not changing their operating methods.
CPB clearly feels there is huge scope for co-operation between capitalist banks and Shariah-compliant institutions and markets – if the western establishment bones up. As Affany puts it: "A thorough understanding of the theory behind Islamic investments could be an increasingly important deal-making tool this decade."
(With inputs from the Wealth Report 2010, Citi Private Bank)