Sharia law could solve Scots housing shortage
Riaz K Tayob
lenders from the public coffers so that the Banksters can stay in the
temple... ]
Sharia law could solve Scots housing shortage
Scottish Housing Minister, Alex Neil, plans to discuss with the Islamic
Finance Council how investors could help to plug the funding gap for new
social housing in Scotland
Jason Allardyce
The Sunday Times, 12 July 2009
Ministers are considering asking Muslim investors to help fund social
housing in Scotland to ease pressure on the government's budget.
The Islamic Finance Council, which promotes the use of finance from
Muslim sources in Scotland, is to meet Alex Neil, the housing minister,
to discuss how Muslim wealth could be used to develop shared-ownership
homes, in accordance with the principles of sharia — Islamic law.
The partnership could potentially save the Scottish government millions
of pounds at a time when its budget is under unprecedented pressure
because of the recession, and lead to a rise in the availability of
affordable homes.
Shelter Scotland, the housing charity, claimed earlier this month that
the number of council and housing-association homes for rent in Scotland
has fallen to the lowest level for 50 years. There are about 599,000
socially rented properties across the country — 18% fewer than in 1998
and the lowest figure since 1959.
Under the Scottish government proposals, Muslim financiers would fund
new properties with backing from the government. Under sharia, Muslims
are forbidden from charging usury — or interest rates — in their
financial dealings, so householders with a stake in properties would pay
a rent set at a level similar to mortgage rates.
Unlike those with conventional British mortgages, householders would be
largely insulated from negative equity.
If the occupier had a 10% stake in a property worth £200,000 that later
fell in value to £150,000 and wanted to sell, the financier with a 90%
stake would, unlike banks offering conventional mortgages, be unable to
recover the £180,000 they had put in initially.
Instead, they would have to settle for 90% of the sale price, recovering
only £135,000, while the householder received £15,000 and avoided having
to cover the bank’s £45,000 shortfall.
The attraction for Islamic financiers would be that, if and when
property prices rise, they could qualify for a higher share of the
profits when homes are sold, gaining not only 90% of the final value but
an extra bonus from the proceeds. The scheme would be open to
non-Muslims, as long as they agreed not to charge interest on their
investment.
Omar Shaikh, a member of the Islamic Finance Council, which has been
discussing a wide range of investment opportunities with ministers, said
that the model would prove attractive to ethical investors and Scots
looking for affordable or mid-range housing.
“The industry is very young but very energetic and growing at a rapid
pace and, with the liquidity that is backing it from the Gulf, there is
absolutely an appetite for this,” he said.
“It could also be a very attractive product in the current climate for
people of all faiths and none. The ability to avoid negative equity is a
very powerful message that would resonate for many in the middle classes
who can’t afford to be stuck in such an awkward situation.”
Neil said he is interested in learning from Islamic practices to fund
new homes. “I would be happy to sit down and talk to them [The Islamic
Finance Council] about their ideas.”
http://www.timesonline.co.uk/tol/news/uk/scotland/article6689751.ece