Commercial Property Finance
We have partnerships with leading Islamic banks. If your looking to start a new business, buy a commercial property, or refinance a property, we help you secure shariah compliant finance.
Most banks that offer commercial property finance employ the Diminishing Musharaka with Ijara principle. In simple terms, the process is as follows:
- You choose the property and an application is made to the bank to purchase the property.
- The bank will then carry out a valuation on the property and liase with the necessary solicitors.
- Providing that the property meets the bank's criteria, it will purchase the property at the price agreed between the customer and the seller. Both the customer and the bank make contributions towards the purchase cost e.g. 70% from the bank and 30% from the customer. The purchase is then made and the bank takes legal ownership of the property.
- At the same time, the bank enters into 2 agreements with the customer:
- The first is Ijara (lease agreement) under which the bank agrees to let the property to the customer for an agreed term of years. During this time, rental payments are made on a monthly basis.
- The second is the Diminishing Musharaka agreement where the customer will be committed to buy the bank's share of the property at the same purchase price. This will again will be made through monthly payments. The equity in the property increases in your favour with every payment made towards aquiring the bank's share. This means that the amount of rent payable by the customer will gradually decrease to reflect your share.
- The customer also agrees to mortgage the lease contract and his share in the property to the bank to secure the rental payments.
5. In due course, after the bank’s entire share has been bought and all rent has been paid under the lease, the bank transfers the property’s legal title to you.
Please note: Certain procedures may vary from bank to bank. The above descriptions are there to aid your understanding of Shariah Compliant Commercial Finance and should be used as a guide only.
To see how we can apply for Commercial Finance on your behalf, visit our how to apply section.
For more information on Shariah Finance, please visit our dedicated section.
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