What is Murabaha?
Murabaha is a cost-plus financing structure where the bank buys the property and sells it to you at an agreed-upon profit margin. Unlike a conventional loan where you pay interest on money borrowed, Murabaha is a transparent sale contract.
Key Differences
- No Interest (Riba): The profit is fixed and agreed upon upfront.
- Asset-Backed: The transaction is based on a tangible asset (the home), not money lending.
- Risk Sharing: The bank shares in the risk of ownership until the property is sold to you.
This model ensures compliance with Shariah principles while providing a secure path to homeownership.