Shari'ah Compliance

Frequently Asked Questions

Q. What does being "Shari'ah compliant" mean?

Being Shari'ah compliant means complying with Shari'ah investment principles and procedures which are consistent with principles of Islamic law. It also requires general considerations of ethical investing in terms of social responsibility in asset selection and structuring.

Q. What are the differences in the day-to-day operations of Sabana REIT compared to conventional REITs?

We have to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities prohibited under the Shari'ah guidelines should not exceed 5.0% per annum of the Trust's gross revenue. On an annual basis, our Shari'ah Advisor, Five Pillars Pte. Ltd. (the "Shari'ah Advisor") conducts audit checks to ensure that the business activities conducted by the tenants are permissible by Shari'ah guidelines. Business activities relating to conventional financial and insurance services, gaming, non-halal production, tobacco-related products, non-permitted entertainment activities and stock-broking in non-compliant securities are considered to be non-permissible. The assessments by the Shari'ah Advisor would then be reported to the Independent Shari'ah Committee which will decide if Sabana REIT is eligible for re-certification as being Shari'ah compliant.

In terms of financing, investment and deposit facilities and insurance and risk management solutions, we will also seek Shari'ah compliant options where commercially available.

Q. Does being Shari'ah compliant limit growth opportunities for Sabana REIT?

The majority of the properties within the industrial property sector are Shari'ah compliant by nature i.e. they do not house business activities which are non-permissible and thus being Shari'ah compliant does not limit Sabana REIT's growth prospects. In addition, being Shari'ah compliant allows Sabana REIT to access the Islamic equity markets which has enabled Sabana REIT to access more diverse sources of equity funding and a larger investor base.

Q. How is Sabana REIT different from other listed Shari'ah compliant REITs?

Sabana REIT is the only Singapore-listed REIT which has obtained a certification issued by an Independent Shari'ah Committee consisting of respected Islamic scholars from Malaysia and Saudi Arabia. The certificate represents an endorsement of Sabana REIT's compliance with Shari'ah guidelines according to standards generally accepted in GCC region, such that the total income should not exceed 5.0% of the Trust's gross revenue. The standards used in the GCC states are typically stricter compared to the other parts of the world, thus making it accessible to even more Shari'ah investors. Any non-Shari'ah income generated by Sabana REIT is given away to charitable causes on a quarterly basis. For FY 2017, Sabana REIT's non-Shari'ah income that was donated represents only approximately 0.02% of Sabana REIT's gross revenue.

Q. Does Sabana REIT have to comply with prevailing legislation, regulations, accounting standards, guidelines and directives affecting REITs in Singapore or is it only subject to Shari'ah Guidelines?

Sabana REIT has to and will comply with prevailing legislation, regulation, accounting standards, guidelines and directives affecting REITs in Singapore. Sabana REIT's adherence to Shari'ah investment principles and procedures are in addition to the laws, rules and regulations of any other relevant regulatory or supervisory body or agency applicable to Sabana REIT. Where Shari'ah principles conflict with the laws, rules and regulations applicable to Sabana REIT, such laws, rules and regulations shall prevail.