Islamic Financial Institutions and Real Estate Cycle

Abstract


 
 
 The role of Islamic financial intuitions is essential in providing Islamic financing specifically to investors and stakeholders to invest in real estate. Therefore, understanding the link of the real estate cycle to the financial institutions is crucial. This is because the real estate cycle is one of the critical elements that will affect financing decisions and strategies of the banking sectors. Hence, this paper employed meta-analysis which aims (1) to systematically review survey the growing literature on real estate cycle and its links to the financial institutions; (2) to highlight possible cross-country trend analysis financial strategy among investors in dealing in with the real estate cycle. The results of the study suggest that during the peak cycle or period of crisis, most investors are risk-averse and increase the risk to the financing of real estate as well. This real estate cycle that occurs almost every 10 years in conventional real estate sectors also give some consequences to the Islamic financial institutions. This paper suggests to investors to understand the real estate cycle and its impact on Islamic financial institutions.
 
 

Adoption of pre-letting and pre-sale financing arrangements for real estate development in a developing economy: an assessment of the influencing factors

“…Bessembinder and Lemmon (2002) mentioned six factors, namely, delay in construction exercise that forces lessees or buyers to accept incomplete properties; housing space shrinkage; inaccurate housing information; lack of regulatory framework which results in inadequate means of redress; features mismatches, a situation where the actual and expected fittings and finishes specification do not align; and the creation of false impression through unscrupulous sales strategy. Harun et al (2018) asserted that financial risks that are generally associated with real estate development are often of significant concern to both the development firms and buyers or investors. Such risks which include high cost of financing risks and high cost of operation risks, among others, make investors and firms sceptical in decision-making.…”

“…Harun et al . (2018) asserted that financial risks that are generally associated with real estate development are often of significant concern to both the development firms and buyers or investors.…”