Asian Finance Bank, one of three foreign Islamic lenders in Malaysia, plans to set up an Islamic property fund of up to $500 million in 2009 to tap what it considers an undervalued market.
The bank, owned by Qatar Islamic Bank, RUSD Investment Bank Inc of Saudi Arabia and Global Investment House of Kuwait, also plans to set up a fully-fledged Islamic bank in Indonesia by 2010 as part of its effort to build in-roads into Asia.
Faisal Alshowaikh, chief executive of Asian Finance Bank, told Reuters in an interview the property market was relatively subdued following the global credit crisis, but he saw potential for a property fund in Malaysia.
"Right now the property market has suffered from sub-prime, so it is not something I would pursue aggressively," he said, referring to defaults on low-end mortgages in the United States that have rattled markets worldwide.
"But this is something we have in our minds to set up. When you look at Indochina and other countries like Korea, Singapore, Hong Kong, I think the property market is very much undervalued in Malaysia."
The global Islamic finance market is one of the fastest growing in the world. Islamic assets are growing at an annual pace of 20 percent and are set to hit $2 trillion in 2010 from the current $900 billion, largely thanks to a flood of petrodollars, Ernst & Young said in February.
Asian Finance Bank currently has a representative office in Indonesia, a country analysts say has the potential to become a major player in global Islamic finance because around 85 per cent of its population is Muslim.
"It is a big market for Islamic banking which needs to be aggressively explored,"Alshowaikh said on the sidelines of an Islamic banking conference in Jakarta.
"We have plans to make this representative office into a fully-fledged Islamic bank in Indonesia. In this part of the world, with a population at 229 million -- and a relatively small percentage of the market here is Islamic -- I believe we can do more on the retail side and do more on wealth management."
Indonesia's Islamic finance market lags neighbouring countries Malaysia and Singapore because of tax and accounting framework issues.
But analysts expect sharia financing to take off after Indonesia's parliament passed a long-awaited shariah finance law last month.
Indonesia's central bank says the Islamic banking industry in the world's most populous Muslim nation is set to meet its target of a 10-15 percent share of national banking assets by 2015 from less than 5 per cent now.
Asian Finance Bank was incorporated in Malaysia in 2005 and aims to develop a regional banking network providing a wide range of services.
The chief executive said it would like to establish representative offices in Singapore, Brunei, China, South Korea, Vietnam, Myanmar, Laos and Cambodia, to expand its Asian presence.
The bank's website says Qatar Islamic Bank is its biggest investor with a 70 per cent share in the company. RUSD Investment Bank Inc has 20 per cent and Global Investment House has 10 per cent.