Bahraini Islamic lender Ithmaar Bank has put on hold a planned $500 million fund targeting investments in South American real estate due to current tough markets, it said on Sunday.

The fund had been announced in May 2008 as a joint venture between Ithmaar, Kuwait's Al Safat Investment Company  and Bahrain-based Arabian Ventures.

Investors in the Gulf Arab region have been holding onto their funds since the global financial crisis started to reach the region late last year and oil prices tumbled from their peak at almost $150 per barrel last summer.

In a regulatory filing to the Bahraini stock exchange, Ithmaar also said work on its Al Jazair beach front real estate project in the southwest of Bahrain has not started due to disagreements with the country's government.

A spokesman for the bank, which has a market value of just under $500 million, said the project had not yet been authorised by the government, without giving further details.-Reuters