Specialist finance · 2 min read
Islamic Home Finance Explained: Ijara vs Murabaha
Islamic home finance is Sharia-compliant: instead of lending you money and charging interest, the bank buys the property and sells or leases it to you.
By Trevio ·
Ijara (lease)
The bank buys the property and leases it to you for a set term, with you paying rent that includes a profit element. At the end, ownership transfers to you. Ijara is common in UAE home finance.
Murabaha (cost-plus sale)
The bank buys the property and sells it to you at a higher, agreed price, which you repay in instalments. The total is agreed upfront, so there's no interest.
How it differs from a conventional mortgage
- No interest — you pay profit or rent instead.
- Ownership structure — the bank holds title during the term in many structures.
- Pricing — quoted as a profit rate, which isn't always directly comparable to interest.
Is it more expensive?
Not necessarily. Profit rates are often competitive, but fees and terms differ — compare the total cost, not only the rate.
Who is it for?
Anyone who wants financing that aligns with Sharia principles. It's available to residents, and often to non-residents, though availability varies by bank.
FAQs
Do Islamic mortgages follow the same Central Bank limits?
Yes, LTV and debt burden limits apply in the same way.
Can I refinance an Islamic mortgage?
Often yes, though structure and fees vary by bank.
Is Ijara the same as renting?
No. Ownership transfers to you at the end of the term.
Want Sharia-compliant finance? Book a free consultation and we'll walk you through your options.