Dubai-based KM Properties – the property arm of the UAE-based Al Rostamani Enterprise – has announced the creation of a US$2.3bn (£1.3bn, 1.9bn euro) Sharia-compliant, real estate development fund.

KM Properties established the fund to develop an international chain of hotels which abide by the Islamic principles of Sharia.

Phase one of the fund is closed to subscribers but it is anticipated that international corporations will enter the fund in phase two.

KM Properties has already committed US$290m (£165m, 240m euro) to develop a 700-bed hotel and apartment project in Dubai, which is expected to open in 2008.

The flagship property will form the blueprint for a multi-market rollout of Sharia hotels, as well as attracting companies to the Sharia hotel brand.

Three management agreements have been signed and a further seven are in advanced stages of negotiation.

The company has also established a Sharia-complaint hospitality arm to operate the developing hotel chain.

Existing properties may also be managed by the new operating arm but would retain their trading name.

KM Properties aims to strengthen its position as a lead market developer in the Middle East by focusing on its core business of property development for sale locally and regionally to achieve high returns.