SMSFs will be able to gain exposure to the residential property market, without having to hold any assets directly, through two new funds being launched by an Islamic finance specialist.
Crescent Finance has released its Crescent Growth Fund, which will provide investors with access to leveraged capital appreciation of the value of residential real estate in a portfolio that covers property markets across the country.
The companion Crescent Finance Income Fund will give investors access to rent received from the growth fund’s residential properties leased out to tenants with targeted returns of 3 per cent to 4.45 per cent a year.
The funds will be run off a DomaCom equity mortgage product, which use a fractional property ownership platform, and Crescent Finance managing director Dr Sayd Farook said it was expected they would raise an initial $100 million by the end of the year.
In turn, the funds would also finance more than $5 billion of property transactions over the next five years as Crescent Finance would also be a source of residential finance for people who cannot participate in the property market as Islam forbids the paying of interest.
While the funds will be run using Islamic principles, Farook said they would be open to any investor looking at an equitable and ethical partnership-based approach to financing their home.
“One of our first customers is not Muslim and wants to use the legal infrastructure to purchase properties for his children using a self-managed super fund,” he said, adding the funds were open to both retail and wholesale investors.
For those investors who were Muslim, he said: “Crescent Finance plans to provide authentic structures whereby they co-invest funds that are not simply borrowed from a conventional bank at an interest rate and wrapped in legalese to make them appear Islamically compliant.
“Such providers have been around for many years and in effect are mortgage-broking firms with a twist and do not pass the basic smell test on ‘where did you get your money from?’”
Crescent Finance, which is not associated in any way with private equity firm Crescent Capital Partners, is part of the Crescent Group, which also includes the Crescent Wealth Islamic super fund, and has been in operation since 2020.