A Conceptual Analysis on The Application of Reits in Developing

 A CONCEPTUAL ANALYSIS ON THE APPLICATION OF REITS IN DEVELOPING WAQF LAND IN MALAYSIA

Assistant Professor Dr. Nor Azizan Binti Che Embi

Associate Professor Dr. Salina Kassim

Assistant Professor Dr.  Roslily Ramlee

Assistant Professor Dr. Zaharuddin Abdul Rahman

Assistant Professor Dr. Mustafa Omar Mohammed

Associate Professor Dr. Dzuljastri Abdul Razak

Associate Professor Dr. Razali Haron

Assistant Professor Dr. Khairunisah Ibrahim

Associate Professor Dr. Yusuf Salim

Assistant Professor Dr. Yusoff Jelili Amuda

[Universiti Islam Antarabangsa Malaysia (UIAM)]

ABSTRACT

One of the major issues in waqf is the inadequacy of fund that leads to undeveloped waqf assets. In the case of Malaysia, less than 1% of the waqf land has been developed, mainly due to the problem  of  illiquidity and inadequacy in waqf management. Thus, efforts  to find alternative financing methods needs to be expedited in order to address this issues. This study analyses the potential of Islamic REITs (iREITS) as an instrument that could be used as a financing option for waqf  institutions to  acquire commercial assets with high net assets value (NAV) in prime areas. The interest on iREITS as the main focus of the study as a potential instrument to develop waqf land is because REITs are classified as investment instrument with low volatility and low risk. The revenues generated through the issuance of iREITS on the waqf assets would yield rental income that is expected to be large enough to cover the development of waqf land in future.  In  methodology, the study adopts two approaches, namely the primary data analysis through surveys and interview methods, as well as secondary data analysis. The primary data analysis  is adopted to seek public opinion towards iREITs as waqf instruments, and to assess the feedback from waqf administers on the prospects and challenges in adopting iREITs as the financing alternative to develop waqf assets. This includes various stakeholders such as Islamic Religious Council, JAWHAR, Malaysian Waqf Foundation, Securities Commission, and Shari'ah Scholars. Meanwhile, the secondary data analysis is adopted empirical support on how the proposed hybrid iREITs can be used as a complimentary instrument to the existing waqf financing method. The study finds that majority of respondents (90.7%) indicated that they have no knowledge about REITs. This particularly implies that there is practical necessity for creating public awareness about REITs before it is rolled out as method of financing waqf land development in Malaysia. A prodigious proportion of respondents (90.6%) approved the idea that a larger amount of funds would be tapped from REITs given its multiple dimensional categories of contributors to the fund namely; waqf REITs, waqf-dividend holders and investors.