Key highlights:
• Dubai remains an attractive destination for real estate investments
• Middle East came back strong, with Islamic real estate funds growing 23.9% in Q3 2024 after losing some in the previous quarter
• Saudi Arabia leads the Islamic real estate funds market with 69.59% global share
Overview
With the global economy already showing positive trends ahead of the much-anticipated US Federal Reserve rate cut in late September 2024, Q3 2024 reinforced the general perception that the commercial real estate sector has largely stabilized.
Shrugging off lingering effects of pandemic restrictions, hybrid job norms and retail visitations are shifting to more in-person interactions – bringing about cheer to the dampened office and malls sub-sectors. Logistics and warehousing demand continues to be strong with e-commerce drivers while the artificial intelligence advance is spurring mushrooming growth in data centers.
These developments have boosted the real estate investment trusts (REITs) market. The Islamic REITs sector, in particular, has experienced a strong rally, enabling it to outperform the broader global equity markets.
Chart 1: Islamic real estate funds (including REITs) breakdown by region
The IFN Investor Funds Database is currently tracking a total of 58 funds – with 36 from Middle East, eight from Asia Pacific, two from Americas, 11 from Europe and one from Africa.
AuM growth
On a regional level, the IFN Investor Fund Database recorded a mixed performance in overall assets under management (AuM) tracked.
The Middle East, Europe and the Americas saw a significant growth in the real estate funds market – increasing by 23.8%, 14.13% and 4.27% respectively. The African region saw a decline in AuM at 4.36% and a slight drop in the Asia Pacific region of US$7 million.
- Middle East: Up by 23.8% to US$8.35 billion from US$6.74 billion.
- Europe: Up by 14.19% to US$8.85 million from US$7.75 million
- Americas: Up by 4.27% to US$155.96 million from US$149.57 million.
- Africa: Down by 4.36% to US$31.82 million from US$33.27 million
- Asia Pacific: Down by 0.42%, a decrease of US$7 million from US$1.66 billion.
The Bonyan REIT, Derayah REIT, Taleem REIT, Global Shariah REITs portfolio and Al Rajhi Real Estate Monthly Distribution Fund are the top five Middle East Islamic funds which grew the most within the time span of the latest three-month period in terms of absolute AuM. These five funds contributed to an increase of about US$500 million for this region.
Note: The IFN Investor Funds Database is tracking an additional 10 Islamic real estate funds from Turkiye as of Q3 2024 – resulting in the AuM tracked for Europe rising to US$290 million.
Chart 2: Top five Islamic real estate total fund valuations by country
The Middle East and Asia Pacific regions present significant uptick opportunities, driven by strong demand for both commercial and residential real estate. Within the Islamic real estate sector, Saudi Arabia and Malaysia are the dominant players in their respective regions.
Saudi Arabia leads the market, controlling approximately 69.59% of global Islamic real estate funds, which total US$7.3 billion across 28 funds. Malaysia ranks second with 11.54%, representing US$1.21 billion across four funds.
The UAE follows with five real estate funds, valued at US$530.79 million. Turkey maintains a solid presence with 10 funds, amounting to US$281.14 million. Pakistan is represented by two funds totaling US$375.72 million, while Kuwait rounds out the list with three funds worth US$14.88 million.
This distribution highlights the regional variations in market size and the diverse investment opportunities across the Islamic real estate sector.
Table 1: Top Islamic real estate funds by AuM percentage growth in Q3 2024
| Fund | Q2 2024 AuM (US$ million) | Q3 2024 AuM (US$ million) | % Change |
| Derayah REIT | 252.40 | 428.87 | 69.92% |
| Taleem REIT Fund | 146.80 | 230.56 | 57.06% |
| Bonyan REIT | 378.07 | 574.81 | 52.04% |
| Global Sharia REITS Portfolio | 47.38 | 68.93 | 45.49% |
| Hejaz Property Fund | 8.60 | 10.89 | 26.61% |
Table 2: Largest Islamic real estate funds by AuM in Q3 2024
| Fund Name | Fund manager | AuM (US$ million) |
| Amanah Hartanah Bumiputera | Pelaburan Hartanah | 1,070.92 |
| Al Rajhi REIT Fund | Al Rajhi Capital | 833.12 |
| SC REIT Fund | Sedco Capital | 652.96 |
| AlAhli REIT Fund (1) | SNB Capital | 542.56 |
| Alkhabeer REIT Fund | Alkhabeer Capital | 538.61 |
Outlook
Most property analysts concur that negative cyclical forces for the past 18 months have bottomed out and reached a turning point venturing into 2025 – especially with the lowering of interest rates as major central banks and economies are adopting dovish policies to further boost their respective economies.
The forecast shows positivity and growing investor optimism. Inflation and the prolonged recession have come to a close and investors are on the hunt again. Europe real estate prices have stabilized, the North American region is expected to outpace European market and prices for commercial space continued to improve.
In this respect, the UAE enjoys a particularly strong head start amongst many others and recent sales figures show this nation had lured significant investments in its real estate market. The global economic data continues to indicate a stable and moderating economic environment. With further rate cuts expected to persist through the end of 2024 and into 2025, the outlook for Islamic REITs remains favorable.
This report was produced by Elliot Yip and Aravinth Rajendran, financial data analysts at IFN Investor.
