Royal Group obtains S$250m in Islamic green finance from Maybank for two Sentosa hotels

ROYAL Group, a property investment chain, has obtained Islamic green financing amounting to S$250 million from Maybank Singapore.

This is said to be the world's first such loan in the hospitality sector.

This is also the group's first foray into sustainable finance, and the loan will go towards financing the upcoming Raffles Sentosa Resort & Spa Singapore and the existing Sofitel Singapore Sentosa Resort & Spa.

It is upgrading Sofitel Singapore Sentosa Resort & Spa to be assessed for BCA Green Mark Gold certification, while Raffles Sentosa Resort & Spa Singapore is preparing to achieve BCA Green Mark GoldPlus certification when it is completed at the end of 2022.

These Islamic green-financed hotels will embed Shariah-compliant and sustainability concepts in their building design and operations.

The main difference between a conventional green loan and Shariah-compliant green financing is that the latter is structured in accordance with Shariah principles where instead of charging interest, a bank will charge the client profit in consideration of the financing. This comes as charging interest is not allowed under Islamic law.

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Other additional features of Shariah-compliant financing include a fixed ceiling rate feature embedded in the facility structure to provide an element of certainty to the client so that they will not pay more than the contracted rate, and non-compounding of profit or charges in the event of late payment of amounts due.

The principles of sustainability are said to be closely aligned with the objectives of Shariah which promote and enhance sustainable development through the principles of fairness, equality and ethics.

Bobby Hiranandani, co-chairman of Royal Group, said: "Being Shariah-compliant is not only going the sustainable route, but also being ethical in our approach in building and managing both properties.

"When international travel resumes after Covid-19, customers would have a different mentality; they would want to live in a well-run property that is conscientiously built to blend in sustainably and harmoniously with the environment which Raffles Sentosa and Sofitel Singapore Sentosa offer."

Gregory Seow, head of global banking at Maybank Singapore, noted that Shariah-compliant financing benefits customers through its product features as well as grants them access to a wider customer or investor base.

"Moving forward, Maybank Singapore expects to see a greater convergence between the products and services offered under both the conventional and Islamic banking systems premised on ESG (environment, social and governance)."