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The new home financing product is based on the diminishing musharakah (المشاركة المتناقصة) contract, which refers to a joint partnership contract between the financier and its client. The bank had previously launched products using other financing modes, such as ijarah ( إجارة) and forward ijarah (الإجارة الموصوفة في الذمة).
Musharakah literally means partnership. Under the partnership financing mode, the financial institution and its client jointly own a property. The bank’s share of the property is divided into a number of units, and the client will purchase the units of the bank’s share one by one until the client owns the whole property. It is an option that is based on the principle of partnership between two parties where the bank and the client jointly purchase and acquire the property the client chooses.
Both parties may register the asset’s title under their names together or under the name of one of them as per the agreement.
“This product is designed in an innovative and modern way to satisfy the needs of different clients. The minimum age of the applicant should be 22 years, but is 18 years for public sector employees. The minimum salary requirement is OMR350. The settlement term can be up to 25 years with maximum financing of 80% of the property value or OMR450,000,” said Mohamoud Barre Dualeh, Head of Product Development, Alizz Islamic Bank.
The client must give an undertaking to purchase the bank’s share before the bank signs the original purchase agreement, he stressed. Then the bank and the client will jointly purchase the property from the original owner. The bank also grants the client a permission to lease as well if the client wants to rent out the property.
Under ijarah muntahia bittamleek, which literally translates to “lease ending with ownership transfer”, Alizz Islamic Bank buys the property from the seller and leases it out to the customer with a promise to sell it at the end of the lease term.
Under ijarah muntahia bittamleek, which literally translates to “lease ending with ownership transfer”, Alizz Islamic Bank buys the property from the seller and leases it out to the customer with a promise to sell it at the end of the lease term.
Another shari'ah-compliant option is forward ijarah home finance in which Alizz Islamic Bank, in its capacity as lessor, constructs the property at the customer’s request and leases it out to the customer after the completion of construction for a certain period of time and against a rental amount. Once the customer has met all obligations under the forward ijarah contract, the bank will transfer the ownership of the property to the customer. The forward ijarah option is also available for properties under construction.
Both options are open to Omani nationals and resident expatriates, whether salaried or self-employed, and require simple documentation with fast and easy approval processes. Financing is available for up to 25 years and 80% of the property value. The maximum financing option is again OMR450,000 while the minimum salary required is OMR300 for government employees and OMR350 for private sector employees.
“Ijarah and forward ijarah home finance options offer customers shari'ah-based solutions to realise their dream of owning a home. Both options come with a host of benefits and features to Omani nationals and resident expatriates at competitive rates with easy documentation and fast approval process,” commented Mohamoud Dualeh.