HONG KONG -- Asian Finance Bank, one of three foreign Islamic lenders in Malaysia, plans to invest a $500 million fund in real estate projects in Southeast Asia as the global financial crisis creates more buying opportunities, its vice president for asset management said.

The bank, owned by Qatar Islamic Bank, RUSD Investment Bank Inc. of Saudi Arabia and Global Investment House of Kuwait, would initially invest in budget hotels in Malaysia, Thailand, the Philippines and Indonesia, Mohd Zamri Shariff said.

The bank would also refurbish so-called class B and C office buildings and upgrade them to high-end office spaces, he said.

"We are looking at some undervalued properties in Kuala Lumpur and the ASEAN region," Shariff said.

"This will be our first Asian fund that will be invested solely in real estate development."

The fund is due to be launched next year by the bank, which was incorporated in Malaysia in 2005.

The global financial crisis had pushed property prices lower, creating an opportunity for long-term investors to snap up these assets, Shariff said.

The bank planned to raise the bulk of the $500 million from investors in the Middle East, including the United Arab Emirates and Saudi Arabia, countries awash with petrodollars and looking for attractive outlets for their funds, he said.

"Even if oil prices have fallen, there is no liquidity issue in the Middle East. They are still looking to invest their petrodollars," he said.

BUYERS' MARKET

In Malaysia, property prices were expected to fall by as much as 20 percent this year and next year, ending six years of uninterrupted growth, he said.

"It's a buyers’ market," he added.

While valuations had fallen to attractive levels, the bank remained cautious in investing.

Most Malaysian banks had also scaled back lending to the property sector due to the subprime crisis, he said.

Loans to developers in Malaysia grew just 8.0 percent in August, less than the 30 percent rise in July, Shariff said.

"This is not a good sign. Next year, we are looking at zero growth in property lending, or even a negative figure," he said.

In April this year, the bank launched a $300-million shipping fund, which would be used to acquire oil tankers and other carriers, which would then be leased out, he said.

The shipping fund is set to make its first acquisition worth about $30 million by the end of this year, he said.