IslamicFinance.de

R Lakshmanan, Chief Executive Officer of Sakana Holistic Housing Solutions, said that Islamic financial institutions (IFIs) providing mortgages for off-plan properties are significantly exposed to risks due to delayed delivery and cancellation of several real estate projects, because the IFI owns the asset.
In addition, the mortgage providers have also been affected to fall in property prices and increased defaults due to job losses. His presentation focused on Ijara Mawsofah fi Dhimah (Forward Lease) structure of financing which is used by the mortgage providers for off-plan properties.
Lakshmanan also said that due care should be taken while preparing legal documentation with particular emphasis on penalties due to delayed delivery as this may have a financial impact on the IFI’s operating results. In addition, the IFI should ensure robust credit risk/control. Lakshmanan concluded that adoption of better risk management practices will enable growth of Islamic finance.