Top 7 Halal REIT Stocks in the US: Exploring Shariah-Compliant Investments

CEO Khai Intela
Real Estate Investment Trusts (REITs) are a popular investment option for those seeking regular income streams. These companies own and operate income-generating real estate properties, distributing at least 90% of their taxable income to shareholders...

Real Estate Investment Trusts (REITs) are a popular investment option for those seeking regular income streams. These companies own and operate income-generating real estate properties, distributing at least 90% of their taxable income to shareholders as dividends. REITs can invest in various real estate assets such as office buildings, apartments, shopping malls, hotels, or infrastructures like cell towers and pipelines. They can be publicly traded on stock exchanges or private, offering diversification and potentially higher yields compared to other income-generating investments like bonds.

Understanding The "Halalness" Of REITs

Halal investing in REITs involves investing in properties that comply with Islamic principles. This means avoiding properties used for activities considered forbidden or immoral under Shariah, like the production or sale of alcohol or pork products, or interest-based financial services. Halal investors seek REITs that own and operate properties used for halal activities, such as retail or residential properties leased to businesses compliant with Islamic principles. Thorough research is essential to ensure that the chosen REITs meet ethical and religious standards.

While compiling the list of the top 10 halal stocks in REITs, I noticed some non-shariah-compliant stocks. To understand why they are non-compliant, I evaluated three ratios: revenue ratio, interest ratio, and debt ratio. In the case of REITs, all stocks failed the debt ratio calculation due to excessive reliance on debt. Let's look at an example:

Realty Income (O)

  • Revenue Ratio: This ratio should be < 5% for a stock to be shariah-compliant. In Realty Income, it is only 1.14%. ✅
  • Interest Ratio: This ratio should be < 30%. In Realty Income, it is only 3.34%. ✅
  • Debt Ratio: This ratio should be < 30%. In Realty Income, it is 55.24%. ❌

Here is a list of other top stocks in REITs that are non-shariah-compliant:

  • American Tower (AMT)
  • Realty Income (O)
  • Digital Realty (DLR)
  • SBA Communications (SBAC)
  • Sun Communities (SUI)
  • Kimco Realty (KIM)
  • Gaming and Leisure Properties (GLPI)
  • National Retail Properties (NNN)
  • Prologis (PLD)

REITs Sector Core Activities

The table below highlights the primary activities and major products in the REITs sector:

Primary Activities Major Products
Property purchasing, development, and management Commercial, industrial, retail, and residential real estate
Mortgage financing Loans for real estate purchases
Sell clothing and clothing accessories stores Retail properties like shopping malls or strip malls
Sell gasoline and other automotive products Other commercial properties like office buildings or industrial properties
Hybrid REITs Combination of different property types
Mortgage REITs Mortgage-backed securities or financing for real estate purchases

Although some activities like mortgages may not comply with Shariah principles, not all REITs engage in such activities. Shariah-compliant REITs exist within these sectors, aligning with ethical standards.

REITs Sector - Revenue REITs sector revenue

REITs Sector - Major Market REITs sector major market

Now, Here are the Top 7 Halal Stocks in the REITs

Mid-America Apartment Communities 'MAA'

Mid-America Apartment Communities is known for providing full-cycle and superior investment returns to stockholders. They own and operate luxury apartment complexes across the Southeast, Southwest, and Mid-Atlantic regions of the United States. With over 102,772 apartment units and a market cap of $19.49 Billion, MAA offers a compelling investment opportunity.

Equinix 'EQIX'

Equinix is the world's largest provider of digital infrastructure. They connect industry leaders across various sectors in a digital-first world. With a trusted global platform, Equinix integrates core infrastructure that drives the success of banking, manufacturing, retail, transportation, government, healthcare, and education sectors. EQIX has a market cap of $63.98 Billion.

Crown Castle 'CCI'

Crown Castle owns and operates a vast network of over 40,000 cell towers and approximately 80,000 route miles of fiber in major U.S. markets. Their communication infrastructure connects cities and communities, providing critical data, technology, and wireless services to individuals and companies. With a market cap of $60.70 Billion, Crown Castle is a reliable investment option.

Equity Lifestyle Properties 'ELS'

Equity Lifestyle Properties owns lifestyle-oriented assets including property operations, house sales and rental operations, and RV communities. Their business segments include property operations and home sales and rentals operations. ELS offers a diverse portfolio and has a market cap of $12.91 Billion.

Camden Property Trust 'CPT'

Camden Property Trust is a real estate company focused on owning, managing, developing, redeveloping, and constructing multifamily housing projects. With 167 buildings totaling 56,850 apartments across the United States, Camden offers a significant portfolio. Currently, they have seven developments under construction, expanding their apartment count to 59,104 across 174 buildings. Camden Property Trust has a market cap of $12.77 Billion.

PotlatchDeltic 'PCH'

PotlatchDeltic owns 1.8 million acres of timberland across several states in the United States. They also operate industrial-grade plywood mills, sawmills, and engage in real estate development and timberland sales. As a pioneer in sustainable forest management, PotlatchDeltic is committed to environmental, social, and corporate governance. They have a market cap of $3.85 Billion.

Community Healthcare Trust 'CHCT'

Community Healthcare Trust is a REIT that focuses on properties generating income related to the delivery of outpatient healthcare services. With a portfolio of approximately $667.3 million invested in 131 real estate holdings across 33 states, totaling around 2.8 million square feet, CHCT offers opportunities in the healthcare sector. They have a market cap of $0.91 Billion.

Summary

Real Estate Investment Trusts (REITs) provide investors with income-generating real estate properties and potential dividends. For those seeking halal investments, it's crucial to consider Shariah principles and evaluate ratios like revenue ratio, interest ratio, and debt ratio. While many REITs fail the debt ratio calculation due to excessive reliance on debt, the top halal stocks listed here offer an opportunity to invest in compliant REITs. Research and due diligence are essential to ensure investments align with ethical and religious standards.

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