Islamic home finance is offered by Islamic banks or the Islamic windows of conventional banks, providing an alternative to traditional mortgages. These financing options are structured in a way that avoids charging interest, aligning with Islamic principles that prohibit Riba (usury). The most common structures include Murabaha (cost-plus financing) and Ijara (leasing), both designed to ensure that the financial transactions comply with Sharia law while allowing individuals to purchase houses.
Islamic home finance involves profit-sharing or lease arrangements. In a Murabaha structure, the bank buys the property and sells it to the borrower at a marked-up price, which is paid in instalments. In an Ijara structure, the bank leases the property to the borrower with the option to purchase it at the end of the lease period. These financial services provide a way to secure homeownership without the application of interest, making them ideal for those seeking to adhere to Islamic values in their financial transactions.
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