Produced in partnership with K&L Gates LLP -

Real estate is an increasingly important asset class for Islamic-compliant transactions and banks in the UK. Islamic-compliant finance has proved to be an alternative source of funds entering the UK real estate market as witnessed by such high-profile London real estate deals as the Chelsea Barracks and the Shard.

Real estate as an asset class for Islamic finance and hybrid structures -

Islamic finance uses real estate as an investible, tangible asset class on which to base its financial structures. Since 2010 there has been a notable increase in the number of Islamic funds and Islamic banks providing mezzanine finance for real estate finance transactions.

In such structures:

- a conventional senior bank lends the majority of the debt on an interest payment basis

- the investors inject their equity, and

- the mezzanine finance tranche is put into the structure in an Islamic-compliant way This type of hybrid structure is a way of accessing finance from Islamic funds and Islamic banks.