Types of Shariah compliant home finance services for you to buy your own home – or buy-to-let investment – the Islamic way. Your finance advisor can help you decide which one is right for you.
Murabaha. This is a contract in which the purchase price, the selling price and the profit margin are clearly stated and agreed upon by both provider and investor from the outset. With this ‘fixed rate’ contract, you pay a specific regular amount throughout the financing period.
Ijara. This is a lease contract where the finance provider effectively buys the property outright then leases it to you, the customer, in return for rental payments over a fixed period. Assuming all the payments have been made, the provider promises to transfer ownership of the property to you at the end of the financing period. Under this type of contract, costs and other liabilities arising from owning the property are the provider’s responsibility, while costs and other liabilities arising from using the property are your responsibility. Ijara is only available for properties that are ready for occupancy.
Forward Ijara. This is similar to Ijara, but it applies to properties that are still under construction. The provider undertakes to pay the developer directly, according to his payment schedule. Once the construction is completed, the contract works exactly like an Ijara product. Your repayments to the provider only start once the property is handed over to you.
Istisna’a. This is a contract commonly used to finance the construction of buildings and industrial premises. With Istisna’a, both you and the provider fully agree to the contract price and the specification of the house or building, before construction begins.
Source: Tamweel
Le Journal RIBH 