www.thejakartaglobe.com - Al-’Aqar Healthcare Real Estate Investment Trust, Malaysia’s oldest
Islamic REIT, is considering opening a trust in Indonesia as the nation
reviews its first application five years after legalizing such property
companies.
Kuala Lumpur-based Al-’Aqar, which already owns two
hospitals in Indonesia, would look at registering a trust in the
Southeast Asian country provided it gets tax incentives and clearer
rules on foreigners owning land are implemented, Executive Director
Yusaini Sidek said by e-mail yesterday. (source)
Indonesia has received
its first proposal for a real-estate trust five years after introducing
laws allowing them, according to the Capital Market and Financial
Institution Supervisory Agency. The world’s most populous Muslim country
is lagging behind Singapore, which has 24 REITs, two of them focused on
Indonesian property, and Malaysia, which has 13, including two Islamic
trusts. Islamic assets account for less than 4 percent of total banking
holdings in Indonesia.
“What Indonesia needs now are clearer
guidelines and more information to see REITs begin to grow,” Abas A.
Jalil, the Kuala Lumpur-based chief executive officer at Amanah Capital
Group Ltd., a consultancy company, said in an April 23 interview.
“The
country has the potential to have a very large REIT market.” Regulators
are considering an application for a REIT made in 2012, Fakhri Hilmi,
director of the investment management bureau at the Capital Market and
Financial Institution Supervisory Agency in Jakarta, said in an
interview last week, declining to give more details.
Expanding
Industry Indonesia is trying to expand its Islamic finance industry to
catch up with Malaysia, which has eight times the amount of financial
assets that comply with the religion’s ban on interest, with just 8
percent of the number of Muslims. Islamic bond sales worldwide have
reached $13.3 billion in 2012, compared with $5.8 billion in the same
period last year, according to data compiled by Bloomberg.
Shariah-compliant
securities, or sukuk, returned 3.4 percent in 2012, according to the
HSBC/Nasdaq Dubai US Dollar Sukuk Index, while developing- market debt
rose 7.2 percent, JPMorgan Chase & Co.’s EMBI Global Composite Index
shows.
The average value of industrial land in greater Jakarta
surged 76 percent last year, while the cost of apartments increased 11
percent, according to a Bank Indonesia survey. The total net asset value
of REITs in Malaysia and Singapore may rise 20 percent in the next two
years, Amanah Capital’s Abas predicts. The biggest impediment to growth
is the finite amount of sizable assets, which may be solved by
Indonesia’s entry into the market, he said.
Malaysia was the
first country to issue rules for Islamic real-estate trusts in Nov.
2005, stipulating they must earn at least 80 percent of income from
Shariah-compliant activities. Property trusts in the world’s largest
Islamic bond market are exempt from paying income taxes should they
distribute at least 90 percent of their annual earnings to investors,
according to Bursa Malaysia. Indonesia can start a REIT market when it
drafts similar regulations to Malaysia, said Al-’Aqar’s Yusaini.
The
company is seeking to expand in Indonesia, he said. Singapore imposes
taxes only on trust income not disbursed to unitholders, according to
the city-state’s monetary authority. Along with Malaysia, the country
applies no stamp duty charges on the transfer of assets between approved
trusts. Indonesia has no provisions to allow income-tax relief on
distributed profits or stamp duty exemptions.
Lippo Malls
Indonesia Retail Trust and First Real Estate Investment Trust,
non-Islamic vehicles which generate most of their property income in
Indonesia, are both listed in Singapore. ‘Tax Advantages’ HSBC Amanah
Malaysia Bhd. said in March that it is in discussions to set up Islamic
trusts in Singapore that could raise $806 million collectively after the
city-state broadened tax breaks for the industry. “For both investors
and issuers of REITs, there have to be tax advantages,” Ronnie Tan,
First REIT’s Singapore-based chief executive, said in an interview last
week.
“Malaysia is catching up because they’re adopting very
similar guidelines” to Singapore, he said. Indonesia issued four
regulations in Dec. 2007 to govern the registration, structure,
management and principles of real-estate investment trusts to support
the growth of the domestic property industry, according to the
supervisory agency, also known as Bapepam.
The government only
allows citizens to hold full land ownership, while companies and
foreigners may buy leases for the right to use, cultivate or build on a
plot. These contracts last 20 to 25 years and can be extended depending
on approval from the National Land Agency.
“If the regulations
are not clear, we would be glad to explain and clarify them,” Bapepam’s
Hilmi said. “We have made changes to them when they cause undue
challenges for market players. If the challenge is indeed in taxes, then
we will see if there is anything we can do.”
Average yields on
sukuk fell one basis point, or 0.01 percentage point, to 3.71 percent
yesterday, declining from the highest since March 16, according to the
HSBC/Nasdaq index. The yields is 253 basis points more than the London
interbank offered rate, or Libor, compared with 246 more at the end of
last month.
The premium demanded on Indonesia’s 4 percent sukuk
due in November 2018 over Malaysia’s 3.928 percent Islamic notes due
2015 narrowed three basis points to 194 basis points yesterday,
according to data compiled by Bloomberg. Singapore-based Sabana Shari’ah
Compliant Industrial Real Estate Investment Trust, the world’s
largest Islamic property trust, benefits from being Shariah-compliant by
tapping a more diverse pool of investors, Bobby Tay, its chief strategy
officer, said in an interview last week. Sabana was able to sell bonds
to Middle Eastern investors because of this access, he said.
“Only when land titles are very clear, will investors look at Indonesia as a serious up-and-coming market,” Tay said.
Bloomberg
Source: http://www.thejakartaglobe.com/business/real-estate-investment-trusts-target-indonesia-five-years-after-rules/515653 - May 3, 2012
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