LARKIN SENTRAL WAQF PROJECT

Waqf, under Islamic law, is a charitable endowment that involves donating a building, plot of
land or other tangible assets for religious or charitable purposes with no intention of
reclaiming the assets. The donated assets are normally held by a charitable trust in a system
that called as usufruct. As we know, there is the initial public offering (IPO) of waqf shares
through a company that manages endowed land in the state of Johor. The step is widely seen
as an innovative strategy in Islamic finance for effective development of waqf properties in
order to maximize benefits for the community. The idea of corporate waqf has recently been
enhanced further with an Initial Waqf-Share Offer. With an innovation of great value, the
Waqaf An-Nur Corporation (WAN Corp), the entity set up by Johor Corporation, a public
sector conglomerate to manage the assets and shares it endows and has hit the market with an
offer of 850 million new shares worth RM85 million to the wholesale and the retail markets.
The immediate objective is to generate revenues for upgrading of Larkin Sentral, the public
transport terminal in the state of Johor Bahru and the purchase and development of land for
the benefit of the public.

There are two key points should be highlighted for this waqf which are to enhance awareness
about the concept of waqf and to provide opportunities for people regardless of race or
religion to create wealth and contribute to community. Since the waqf is considered a public
waqf, both Muslims and non-Muslims can participate as investors. Both Muslims and
non-Muslims who subscribe to Larkin Sentral can benefit from the proceeds obtained from
the Offer. The funds will be used to finance the upgrade and repair works of Larkin Sentral ,
the main and largest public transport terminal in Johor Bahru, as well as its adjacent market,
and the acquisition of land for the construction of a seven-stage car park. Besides, for the
parent group, it plays the role of a Maukuf Alaihi, an institution entitled to receive waqf
property through shares and other forms of company securities collectively allocated into
waqf. Besides infrastructure, the firm manages clinics, hospitals and community centres and
provides start-up financing and interest-free capital to small-scale entrepreneurs to start or
grow their businesses, organises community workers and provides contributions to the
society via general welfare allocations.

The funds raised from the Shariah-compliant waqf IPO of the “Larkin Sentral Waqaf
Properties Fund” will be used to renovate and upgrade the main and largest public transport
terminal in Johor Bahru, Larkin Sentral, and its adjacent market, and for the acquisition of
land for the construction of a multi-storey car park by 2019. Furthermore, investors in the
waqf shares will be eligible for tax deduction of up to 7% in case they are individuals and
10% in case they are companies or other institutional shareholders, namely retirement funds,
cooperatives, foundations or workers’ pension funds. The dividend from the waqf shares is
aimed at helping small and low-income vendors and single-mother groups by reducing rental
rates for the market’s shop lots to a reasonable level.
The most important part in the waqf, there are four pillars as required under Shariah. Firstly is
the waqif or the endower which are the subscribers to the shares issued. Secondly, the shares
constitute the maukuf or the endowed assets. Next, the immediate beneficiary of waqf or
maukuf a’laih is WAN Corp. Finally, the ultimate beneficiaries include poor lessees and
tenants of the shops in the Larkin Sentral complex, to be identified by WAN Corp as well as
the larger community of commuters who will benefit from the enhanced and improved
facility. WAN Corp will also act as agent of the waqif to execute the waqf deed or declaration
to form waqf. According to Malaysian laws, the nazir or trustee-manager for all waqf or
endowed assets is the concerned State Islamic Religious Council which is the MAIJ in the
state of Johor Bahru. In an interesting tweak, the concept of nazir is extended to include
another party. MAIJ now assumes the role of nazir-am and delegates the responsibility of
actual management of assets to nazir-khas or special nazir. In the present waqf, WAN Corp
also assumes the role of special nazir. For our information, Waqif subscribe to waqf shares
issued by Larkin Sentral. Next, Waqf Deed executed and waqf shares issued to WAN Corp.
besides, Larkin Sentral declares dividends on the shares held as waqf by WAN Corp.
Furthermore, 90 percent of the dividends received by WAN Corp flow back to Larkin Sentral
for reinvestment in the project as well as distribution as refunds on lease rentals among poor
tenants identified by WAN Cor. Lastly, 10 percent of the dividends received by WAN Corp
passed on to MAIJ.

As is clear from the above, 10 percent dividends received by WAN Corp will be channelled
to the MAIJ, which will then be used as 5 percent will be retained by MAIJ as the sole trustee
of waqf in the State of Johor in accordance with Section 89 of the Administration Enactment
Islamic Religion, 2003 and the remaining 5 percent will be distributed for charitable purposes
involving education, entrepreneurship and health sectors. A bulk of the dividends which is 90
percent received by WAN Corp will be passed on to the project-sponsor, Larkin Sentral for
reinvestment and charitable purposes. In case of reinvestment, the ultimate beneficiaries are
the commuters who will use the enhanced and improved facilities. In case charitable
activities, the ultimate beneficiaries will be poor women-entrepreneurs and micro businesses
who may find it difficult to pay rentals for shops at market rates due to adverse business
conditions. The distribution between “reinvestment purposes” and “charitable purposes”
however, remains unspecified. The dividends from the waqf shares meant for charitable
purpose, will enable Larkin Sentral to charge reasonable rental rates by way of lowering
rental rates by up to 10 percent of going market rental rates for selected tenants of Larkin
Sentral. Secondly, it is to impose minimum rental rates for established shop lots in Larkin
Sentral for single mothers and low-income groups.

To conclude, waqf IPO is changing the perception as it gives the opportunity to participate in
contributing something to the community through the way of Islamic finance. It is also not
exclusive to Muslims, as non-Muslims can also participate on the basis of social
responsibility.
WAQF AFFORDABLE HOUSE

The government’s commitment in creating a special entity to coordinate waqf real estate
development reflects the importance of waqf real estate development. Waqf real estate
development in Malaysia has not been fully explored considering there are still vast swathes
of waqf real estate that have not been developed to fulfil existing social needs. The main
objective is to investigate the potential presented by waqf real estate in Malaysia for the
purpose of housing development; and to evaluate the extent of waqf real estate development
for the purpose of housing could be implemented. In achieving this objective, waqf real estate
belonging to Penang State Religious Islamic Council have been selected as case studies.

For our information, housing ownership in Penang being quite low which is further
aggravated by high levels of real estate values and demographic factors creating stiff
competition in home ownership in Penang. A study found that found that 40% of urban
population comprises disadvantaged people with low affordability to own housing whereby a
three-bedroom two bathrooms apartment with a floor area below 92.9 square metres near the
city centre costs in excess of RM245,000. Hence, the issue of the urban poor not owning safe
and comfortable residences has become controversial in Malaysia. This is exacerbated by
rising costs in addition to debt liabilities and making the creation of truly affordable home
ownership a critical challenge. It is generally accepted that the development of waqf housing
real estate may become one of the solutions in overcoming urban housing woes for the low
and medium income groups.

Due to this ever increasing housing issue and based on the main objective of this paper, it is
perceived that ‘waqf housing schemes’ will be able to fill the void of providing affordable
safe and comfortable housing for the target groups in tandem with the objective of waqf as an
instrument to solve community economic woes. The development of social housing finance
market remains the best solution for the government to aid the needy to own their own
houses. Waqf housing has emerged as a viable alternative that could solve housing woes
among the low and medium income groups. This is not a matter of real estate investment or
real estate inheritance but the existing scenario of a high number of people living in
deplorable conditions due to insufficient income calls for unconventional solutions.

Waqf institutions in Malaysia which are currently using waqf housing projects are selected,
namely Penang State Religious Islamic Council owing to its success in creating the first Waqf
Housing Scheme in Malaysia which is Taman Wakaf Seetee Aisah Seberang Jaya, Pulau
Pinang. Penang SIRC for instance, had to overcome multitude of challenges to ensure the
success of its pioneer project Taman Waqaf Setee Aisah, specifically in terms of sourcing out
financing and finding a developer willing to develop a waqf housing project. The ability of
Penang SIRC to attract various parties to participate in their waqf housing project can be used
as benchmark besides the number of projects that has been implemented.

The success of the Setee Aisah waqf housing scheme in 2003 has made Penang SIRC a
competitive waqf institution in developing the local ummah economy. The success of Penang
SIRC in forging collaboration with UDA Land Sdn. Bhd as well as with Al-Rajhi Bank and
Bank Islam Malaysia Berhad has received deep appreciation among waqf activists. With the
successful completion of the waqf project, UDA has made further inroads by establishing
UDA Waqf Sdn. Bhd. which will also focus on waqf housing developments in other states.
Financial institutions have also opened their eyes on the feasibility of waqf products on their
cashflows. It is evident that waqf real estate developments are not third class status confined
merely to mosques and cemeteries. In fact waqf real estate development may be made more
comprehensive in line with the community needs. Affordable housing in Penang, especially
on the island is very limited. However once waqf housing development commences, low and
medium income groups may have their shot at home ownership on a prestigious real estate on
Penang Island. Initially, some financial institutions were unwilling to take risks becoming
involved in waqf real estate developments. This is because they were unclear on the
‘ingredients’ of waqf. The synergy between banks and waqf developments in the Arab states
is very close. Hence, Al Rajhi Bank grabbed the opportunity to finance Taman Wakaf Seetee
Aisah Seberang Jaya when they received the offer to help. Due to rapid urbanisation of the
Georgetown City Centre, all proposed housing developments are only approved as multi
storey housing developments such as apartments. Although the first waqf housing scheme in
Penang was developed as double storey houses, the focus now is more on medium cost
apartments to ensure they benefit greater number of target group members.

The concept of waqf housing development with a new and innovative framework,
specifically in the use of affordable materials and construction techniques, was given
emphasis. Indirectly, aspects of life quality enhancement and maintaining sustainability of
waqf real estate are created. Thus, the agenda to create comfortable and affordable housing
will be achieved. Taman Wakaf Seetee Aisah Seberang Jaya Pulau Pinang is not the first
housing project for UDA Holdings Berhad. UDA’s Land Department has developed a sizable
number of real estate in cities around the country earmarked to fulfil the national housing
needs across income spectrums. The involvement of financial institutions and developers in
waqf projects has convinced them to utilise waqf lands efficiently.
EXAMPLE FROM OTHERS COUNTRY

Another instrument to support waqf development is sukuk. It has a very strong track record as
in the case of Singapore and Saudi Arabia. In Singapore, sukuk musharakah was introduced
for developing commercial building on waqf land in Bencoolen Street. The old mosque was
redeveloped into a multi-storey complex comprising a modern mosque, a commercial
building and a 12-storey building with 84 serviced apartment units. The financing of the
project was done through the issuance of S$35 million sukuk musharakah which were fully
subscribed by investors.

In Saudi Arabia, the issuance of sukuk al-intifa’ (timeshare) was successfully implemented to
develop the Zamzam Tower in Makkah, one of the apartment towers near the Grand Mosque.
According to Securities Commission of Malaysia, a construction and real estate company,
Munshaat Real Estate Projects Co. had been awarded with a 24-year lease to construct one of
the six towers (Zam Zam Tower) on the waqf land adjacent to the Grand Mosque. Munshaat
was granted with a 24 year lease over the waqf land. In financing, the construction they
issued the sukuk which was achieved via the forward lease contract. Under this contract,
Munshaat leased the asset under the construction to the sukuk holders for 22 years, who paid
the lease rental in advance in one lump sum. With restrictions on ownership of real property
rights in Makkah for foreigners or non-Saudi citizens, the sukuk holders enjoy the intifa’
(usufruct) of the asset after its construction based on time-sharing slots. The developer,
Munshaat, later on used the advance from lease rental (sukuk proceed) to pay for the 24-year
lease rental on the waqf, and the construction costs of the Zam Zam Tower as well. The
interesting feature of sukuk intifa’ is the recognition of a new asset class upon which the
sukuk are based. This new asset class is in the category of manfa’ah (usufruct).
PERBADANAN WAKAF SELANGOR

As we know, there are some waqf institutions in Malaysia. One of them is Perbadanan Wakaf
Selangor. There are some duties which are done by them which are act as an advisor to Majlis
Agama Islam Selangor related to Waqf. It also helps to strengthen a waqf organization such
as Lembaga Zakat Selangor. Last but not least, it acts as Perintah Penubuhan Perbadanan
Wakaf Selangor in 2012. Besides, for our information, Urus Maju Ehsan (M) Sdn Bhd is a
wholly-owned company by Perbadanan Wakaf Selangor. It works to implement all waqf
development plans.

The most important part is Perbadanan Wakaf Selangor (M) Sdn. Bhd cooperate with Urus
Maju Ehsan Sdn. Bhd (UME) have implemented five development projects involved waqf
land which valued RM135 million in this state. According to the Executive Manager of
UME, the projects involved 330 terraced houses, shop lots and commercial buildings.
Furthermore, this project have been estimated to be done in 2018 and offered the price range
between RM250,000 and RM650,000. The projects which included are UME Teratai
Avenue, UME Impian Taman Desa Kencana which involved two lots and UME Gemersik
Taman Meru Makmur at Meru, Klang and also UME Ehsan Residence at Seksyen 30 Shah
Alam. Moreover, there is also Semi-D double storey in Taman Impian Kasturi. This
development collaborated with Perbadanan Wakaf Selangor, Nada Sepakat Sdn Bhd Majlis
Agama Islam Selangor. The area have 1.21 hectare in Jalan Abdullah which is located at Kota
Kemuning. For our information, the sale includes the concept Al-Ijarah and Tawarruq
especially for the Islamic buyers only.

Based on this waqf land project, the objective is to ensure that the development products of
waqf land should be owned by the Muslims who need it instead of focusing to get profit. As
an addition, the price of waqf land which implemented by UME have the price of 20 percent
lower from the market price and it can help more people to afford it.
COMMERCIAL BUILDING – WAQF BY AHMED DOWJEE DADABHOY

In Malaysia, Menara Bank Islam development is considered to be one of the most prominent
waqf projects. According to waqf expert Siti Mashitoh Mahamood, the 34-storey building is a
unique model of a waqf development project under the administration of the Federal
Territory Islamic Religious Council (MAIWP).

The building was built on 1.21 acres of waqf land endowed by an Indian Muslim, the late
Ahmad Dawjee Dadabhoy. It was developed using a build, operate and transfer (BOT)
scheme as well as the Islamic concepts of Wakalah, Ijarah and Istisna`. Menara Bank Islam
was the first large-scale commercial development project constructed on waqf land in
Malaysia. It involved three leading Islamic organizations, namely the MAIWP, Pilgrims
Savings Board (LTH) and Bank Islam Malaysia Berhad (BIMB). Besides, Menara Bank
Islam is a towering monument to the achievement of today’s Muslim community. It
showcases the capability of the nation’s various Muslim organisations in developing the
Waqf land right in the midst of the vibrant “Golden Triangle” area of Kuala Lumpur. The
construction of Menara Bank Islam is a milestone in the industry as it is the first
commercially-developed Waqf land project.

Menara Bank Islam was born out of Lembaga Tabung Haji’s (TH) effort in providing 100%
financing for its construction. This investment not only provides long-term returns for TH
depositors but also supports its mission to be the pillar of economy for the Muslim
community. The project is completed by Bank Islam Malaysia Berhad’s (Bank Islam)
commitment to become the anchor tenant for the building. Bank Islam has given its
agreement to have the building as it’s headquarter, in line with its status as the pioneer of
Islamic banking in Malaysia. A smart partnership has been developed between various
Muslim organisations which include MAIWP, TH Properties Group of Companies, Lembaga
Tabung Haji and Bank Islam to ensure that this Waqf land is of benefit to the Muslim
community in the surrounding area.
http://www.bankislam.com.my/home/corporate-info/about-us/corporate-profile/about-mbi/

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