'Islamic banking to spur revival of property market'.
The recent Royal Directive authorising the offering of Islamic banking services - for the first time in the Sultanate of Oman - has the potential to jumpstart a recovery of the once-vibrant property market, according to the reputable realty management firm.
Appreciating the government's initiative, Mohamed Ayjaz, general manager of Hamptons International & Partners (Oman), commented: "As a widely embraced alternative to conventional interest-based banking, Islamic finance has the potential to, among other things, spur a revival of the domestic real estate sector.
This impending resurgence will not only help bolster investor confidence in the local market, but also accelerate national economic growth as well."
Over the past two decades, Islamic finance has burgeoned into a $1 trillion global industry that, among other things, has served as a vital source of funding for real estate projects and developments around the world.
Sharia-compliant banking, which relies on the profitability of the project and not on fixed interest rates offered by conventional banks, has been widely tapped by realtors in places as far afield as Japan, United States and Europe besides the Middle East.
This mode of finance is also acknowledged as a socially responsible route to investment, particularly as financing institutions shun investments that are not compatible with Islamic norms or are fraught with undue uncertainty.
Several modes of Islamic financing have been developed based on the primary tenet of Islamic financial intermediation that mandates the sharing of risk between the lender and the borrower.
They include financial instruments and products such as mudarabah (trust financing), musharakah (equity financing), ijarah (lease financing), murabahah (trade financing), qard al-hassan (benevolence/welfare loans), and istisna (progressive payments).
As a potentially prodigious source of alternative funding, Islamic finance also has the potential to support the realisation of a number of national objectives, Ayjaz points out, noting in particular the government's goal of implementing a range of citizen-centric welfare schemes.
Muscat Press and Publishing House SAOC 2011
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