Revisiting non-interest-bearing financing models in real estate acquisition and investments

Abstract

Purpose This study aims to investigate non-interest-bearing real estate acquisition and investment as financed across four countries, namely, Saudi Arabia, Malaysia, Indonesia and Pakistan. Design/methodology/approach This paper used a quantitative research approach. It employed a Nonlinear Autoregressive Distributed Lag and Autoregressive Distributed Lag model techniques, using quarterly data from 2014Q1 to 2024Q2 for analysis. Findings The findings indicate that financing Mudarabah is stronger in Indonesia than in other non-interest-bearing real estate acquisitions and investments. They also demonstrated that Musharakah and Musharakah-mutanakisah have a significant influence on Mudarabah financing, particularly in Malaysia and Pakistan, but not in Saudi Arabia. The findings also revealed that Musharakah and Musharakah-Mutanakisah asymmetrically and significantly predict Mudarabah financing. Research limitations/implications Data constraint is one of the main limitations of this study. Most Islamic banks that provide their information on the Islamic Financial Services Board database do not provide detailed information that could be used for analysis. Therefore, the analysis was restricted to four Asian countries. Insufficient data for including Murabahah in this study supports the conclusion of some researchers that Murabahah attracts less attention from Islamic banks as a means of financing. Practical implications The findings of this study have practical implications, suggesting that in the presence of asymmetric information, Islamic bank stakeholders possess different levels of information regarding similar contracts. This discrepancy could lead the fund provider to withdraw the investment deposit from the bank, potentially affecting its economic viability. Therefore, intervention by authority is crucial for contract financing, particularly when asymmetric effects are present, before the triple effect of asymmetric information impacts the national economy in countries where asymmetric information is significant. Originality/value This study is unique in employing asymmetric modelling to provide the presence of long-run effects and asymmetric relationships across the countries under study. The findings from this study provide insight into real estate portfolio managers, authorities and prospective investors in non-interest-bearing real estate acquisition and investment across four countries.