Ijara Sukuk represents ownership of person through equal shares in a rented property or real estate or it may also include the usufruct of the real estate. It is a legal way prescribed by Islamic law which gives their owners the right to own the real estate securely. Through this system one receives the rent and can dispose of their Sukuk in a manner that does not affect the right of the lessee since they are tradable. To keep the balance the holders of such Sukuk bear all cost of maintenance of and damage to the real estate.
The State Bank of Pakistan (SBP) has also mentioned that they will invite tenders on December 20th this year for sale of three year government of Pakistan Ijara Sukuk (GIS) from the designated primary dealers in the name of better governed business, which was stated according to the communiqué issued by the central bank monitoring and maintaining the International Sukuk market.
The maximum value today of all assets under the present issuance programme of the Ijara Sukuk in Pakistan is Rs234.6 billion, the communiqué said. The central bank said that Ijara Sukuk will only be issued in accordance with the existing provisions of the notification of the GoP Ijara Sukuk Rules, passed in 2008. While the land taken under the highways including all constructions and improvements on Motorway (M-2) has also been identified and has been proposed as major assets to facilitate the issuance of the Sukuk.
The valuation of all these assets based on land will be carried out by Pakistan Bankers Association (PBA) approved and certidfied two bankers which will be independent valuators and considering the final values brought about by both would be subjected to as the final value used to determine the sale price of the assets.
The land and any other assets involved are owned by the government of Pakistan. Whereas the title to the assets would be currently held by the Pakistan International Sukuk Company Limited (PISCL) as a trustee for the Government of Pakistan, till the deal gets finalized. The government of Pakistan would be the sole owner of all the assets since it has purchased the same from International government of Pakistan Ijarah Sukuk Holders last year in 2010.
Last year Ijarah Sukuk has issued over Rs182 billion between October 2010 and June, which has been facilitating the shift from financing to high quality independent sovereign investments which enables Islamic banking institutions to invest around as 83.7% of their overall incremental assets under the Government’s security during H1-CY11, revealed by the Financial Stability Report of the first half this year put forward by the State Bank of Pakistan (SBP).
Pakistani Government has also put forward the remedies to empower and stabilize the economic crisis prevalent across the country like the Middle Eastern zone on the basis of Sukuk Market as the SBP has been the most interested factor to determine all the pros and cons of this economic decision.