Analysis
One of the most noteworthy transactions in American Islamic finance is the Istisna'a-Ijara paradigm, observed in projects like Maconda Park (2000) and Truman Park (2001). The structure works as follows: an SPV (SPV1) acquires land with investor equity and rents it to a second SPV (Funding SPV). The Funding SPV then contracts with builders via an istisna'a structure (manufacturing/construction contract), disbursing money in phases similar to normal construction draws. Once construction concludes, SPV1 leases the completed structure back to the Funding SPV under ijara, with lease payments emulating loan servicing. Embedded call and put options ensure prepayment or default remedies without violating Shariah prohibitions against interest-based penalties. This model demonstrates both the adaptability and complexity inherent to American Islamic financing — innovative solutions occurring alongside intricate legal frameworks, representing a compromise between Shariah compliance and conventional regulatory requirements.
Key Takeaways
- 1Istisna'a-Ijara is a multi-layered Islamic real estate financing structure proven in U.S. projects
- 2Uses dual SPV structure: one acquires land, another handles construction financing
- 3Construction payments disbursed in phases via istisna'a, then converted to ijara lease upon completion
- 4Embedded call/put options handle prepayment and default without interest-based penalties
- 5Maconda Park (2000) and Truman Park (2001) are landmark U.S. Islamic finance transactions
Key Statistics
U.S. Market Relevance
Demonstrates sophistication of Islamic finance in U.S. real estate. Useful for advanced explainer content and credibility-building articles.
Citation
Mohammad Kabir Hassan, Mohammad Rezoanul Hoque, Mustafa Raza Rabbani. Hassan et al. (2025) - AQU Journal of Islamic Economics, Vol. 5 No. 2 (2025).
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