A 2015 University of SA study of Australian Muslims found that 15 percent of Australia’s 476,290 Muslims owned their homes, while nearly 31 percent of the general population owned their homes.
Among Muslim and non-Muslim Australians, the proportion of people with a mortgage was around 37%, indicating that many Muslims already have access to non-Muslim financing methods.
Many have no choice, says Zac Karolia, who works in industrial property in western Sydney. The 25-year-old is engaged and his fiancée and he wants to buy their first property.
“[We want] nothing too extravagant – maybe a unit or an apartment in the Bankstown area, ”Mr. Karolia said.
“It is quite difficult to seek secure funding that complies with Sharia law,” Karolia said.
He recently bought a car, but to avoid buying it on finance, he ended up leasing it, which was more expensive and meant he didn’t actually own the vehicle. To enter the housing market, he sees little alternative to a conventional mortgage.
“It’s a shame, but basically he’s heading down that road,” he said.
Many existing compliant finance products give ownership to the customer, with a side contract specifying that they buy it on behalf of the bank.
On the other hand, the ownership of Crescent Finance loans is held by an ad hoc vehicle – the platform of the partner Domacom allows real estate co-ownership – with the buyer listed as “common tenant” with a professional trustee.
The buyer pays rent on the house proportional to the equity he owns.
The challenge of halal financing is not only to obtain a structured consumer credit so as not to charge interest. Where the borrowed funds come from also matters, and if these come from wholesale markets that charge interest, a lot of the funds don’t comply.
As Crescent Finance seeds both funds with $ 20 million from sister company Crescent Wealth and seeks to raise $ 100 million from local SMSF and institutional investors by year-end, longer term , he wants to attract funding from Islamic investors, especially in neighboring countries. South East Asia.
Pension funds in Malaysia, Indonesia and Brunei were interested in exposure to Australian residential real estate, through listed and marketable securities called sukuk in Islamic finance, said Sayd Farook, Managing Director of Crescent Finance.
“We know there is a huge gap and there is a demand for it,” Dr. Farook said.
“We believe that demand for institutional grade residential mortgage backed securities will also be very strong in the very near future. And that’s exposure to a new market that Australia has never played in in terms of raising funds for debt capital markets.
The income fund will take 1 percentage point of gross margin and aims for returns between 3-4.45%, while the returns of the capital fund will reflect the entire residential market. Crescent Finance’s forecast is based on funding estimates of between 1,350 and 1,650 homes over the next five years, Dr. Farook said.