2.6
Commercial Real Estate and
Project Financing
Richard T de Belder, Denton Wilde Sapte LLP
Introduction
The commercial development of real estate will often involve the acquisition
of real estate interests, usually coupled with the construction and onward
sale or leasing of a building. Project finance will invariably involve a real
estate interest and will often be coupled with some exploitation rights, such
as a concession agreement. The term “project finance” is usually also
associated with financing on a non-recourse basis; in other words the
financiers will primarily look to the project assets and revenues as being the
main source of repayment (although there can be other methods of support,
such as equity contributionsby the sponsors, shareholder guarantees, etc).
Islamic finance offers enough flexibility for different structures to be
created to meet with customers’ requirements. The structures will usually
be a mix of Islamic financing techniques, with the choice being determined
by a variety of factors, some commercial, some legal and some Shari’a driven.
The Islamic finance techniques that are considered in this chapter are as
follows:
- Istisna’a;
- Ijarah;
- Murabaha;
- Tawarruq;
- Mudaraba; and
- Musharaka.
Depending on the situation, other techniques can be employed, such as
Shari’a-compliant currency exchange products, and the underlying Islamic
financing techniques might be capable of being packaged in the form of
sukuk.
Istisna’a
This is a contract for the sale of an asset that is still to be constructed or
manufactured. Payment can be immediate or deferred, and payment by
