"Does anyone know why it has to be owned by muslims? Is there a particular reason the 500 plots should not be used?"

It's a shame that Layla4 doesn't suggest answers rather than leading questions.

Muslims would like to own their cemeteries for the same reasons that Jews and Christians like to own their own cemeteries. Simply put, they want their final resting places to be among people that share their point of view. A Christian may not wish to be buried beside a Satanist, for example. Call it irrational if you wish, but that's the way it is. And as it's the deceased's last wish on earth, is it too much to ask?