An analysis of house price index as the alternative pricing benchmark for Islamic home financing

Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of a...

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Main Authors:	Redzuan, Nur Harena, Kassim, Salina
Other Authors:	Noordin, Fauziah
Format:	Book Chapter
Language:	English
Published:	Springer Nature Singapore Pte Ltd 2018
Subjects:	HG3368 Islamic Banking and Finance
Online Access:	http://irep.iium.edu.my/69562/ http://irep.iium.edu.my/69562/ http://irep.iium.edu.my/69562/7/69562_An%20analysis%20of%20house%20price%20index%20as%20the%20alternative.pdf

id	iium-69562
recordtype	eprints
spelling	iium-695622019-03-07T07:46:39Z http://irep.iium.edu.my/69562/ An analysis of house price index as the alternative pricing benchmark for Islamic home financing Redzuan, Nur Harena Kassim, Salina HG3368 Islamic Banking and Finance Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of an alternative pricing mechanism for Islamic home financing products. In achieving its objective, the study tests the relationships between current interest rate benchmark and house price with the economic variable. The study focuses on Malaysia as a case study and uses quarterly data frequency covering the period from 2001 to 2015. Specifically, the study compares the Base Lending Rate (BLR) and Housing Price Index (HPI) with the economic growth as the main indicator for economic activity. Through the correlation analysis, the study finds that the non-interest benchmark shows better relationships with macroeconomic variable compared to the interest-based benchmark, indicating that the alternative benchmark has a stronger link to the economic movements. The ARDL regression analysis reveals that the house price has a significant relationship with economic growth in Malaysia case. The findings of this study would provide important insights into the viability of house price index as the alternative to the benchmark of the equity financing home financing product. This study contributes to the empirical evidence on the feasibility of adopting the interest-free benchmark to price Islamic home financing products. Springer Nature Singapore Pte Ltd Noordin, Fauziah Othman, Abdul Kadir Kassim, Erne Suzila 2018 Book Chapter PeerReviewed application/pdf en http://irep.iium.edu.my/69562/7/69562_An%20analysis%20of%20house%20price%20index%20as%20the%20alternative.pdf Redzuan, Nur Harena and Kassim, Salina (2018) An analysis of house price index as the alternative pricing benchmark for Islamic home financing. In: Proceedings of the 2nd Advances in Business Research International Conference ABRIC2016. Springer Nature Singapore Pte Ltd, Singapore, pp. 197-208. ISBN 978-981-10-6053-3 https://www.springer.com/gp/book/9789811060526
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG3368 Islamic Banking and Finance
spellingShingle	HG3368 Islamic Banking and Finance Redzuan, Nur Harena Kassim, Salina An analysis of house price index as the alternative pricing benchmark for Islamic home financing
description	Currently, major interest rates, such as the Base Lending Rate (BLR) and Kuala Lumpur Interbank Offered Rate (KLIBOR) are widely used as reference rates by the Islamic financial institutions to benchmark a broad range of financial products and contracts. This study aims to compare the viability of an alternative pricing mechanism for Islamic home financing products. In achieving its objective, the study tests the relationships between current interest rate benchmark and house price with the economic variable. The study focuses on Malaysia as a case study and uses quarterly data frequency covering the period from 2001 to 2015. Specifically, the study compares the Base Lending Rate (BLR) and Housing Price Index (HPI) with the economic growth as the main indicator for economic activity. Through the correlation analysis, the study finds that the non-interest benchmark shows better relationships with macroeconomic variable compared to the interest-based benchmark, indicating that the alternative benchmark has a stronger link to the economic movements. The ARDL regression analysis reveals that the house price has a significant relationship with economic growth in Malaysia case. The findings of this study would provide important insights into the viability of house price index as the alternative to the benchmark of the equity financing home financing product. This study contributes to the empirical evidence on the feasibility of adopting the interest-free benchmark to price Islamic home financing products.
author2	Noordin, Fauziah
author_facet	Noordin, Fauziah Redzuan, Nur Harena Kassim, Salina
format	Book Chapter
author	Redzuan, Nur Harena Kassim, Salina
author_sort	Redzuan, Nur Harena
title	An analysis of house price index as the alternative pricing benchmark for Islamic home financing
title_short	An analysis of house price index as the alternative pricing benchmark for Islamic home financing
title_full	An analysis of house price index as the alternative pricing benchmark for Islamic home financing
title_fullStr	An analysis of house price index as the alternative pricing benchmark for Islamic home financing
title_full_unstemmed	An analysis of house price index as the alternative pricing benchmark for Islamic home financing
title_sort	analysis of house price index as the alternative pricing benchmark for islamic home financing
publisher	Springer Nature Singapore Pte Ltd
publishDate	2018
url	http://irep.iium.edu.my/69562/ http://irep.iium.edu.my/69562/ http://irep.iium.edu.my/69562/7/69562_An%20analysis%20of%20house%20price%20index%20as%20the%20alternative.pdf
first_indexed	2023-09-18T21:38:45Z
last_indexed	2023-09-18T21:38:45Z
_version_	1777412997427232768

An analysis of house price index as the alternative pricing benchmark for Islamic home financing

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