Who owns what?

Ten moments in an Islamic home finance deal. For each one, pick who owns the home, then which set of rules covers the deal: the FCA’s home purchase plan rules or the mortgage rules. Every answer comes with the line that explains it, from our guide to how Islamic mortgages work.

Who owns the home, structure by structure

Diminishing musharaka: you and the provider own the home together from the start, your share grows each month, and once you have bought all of the provider’s share the home is yours.
Ijara: the provider owns the whole home and leases it to you, and the contract sets out how the home passes to you, over the term or at the end.
Commodity murabaha, also called tawarruq: you own the home from day one and the provider takes a charge over it. The provider never owns your home.
Property murabaha: the provider buys the home and sells it on to you at a disclosed higher price; legal title passes to you, with a charge over the property.

Diminishing musharaka and ijara are usually regulated home purchase plans. The test is in the law, not the structure name: you or a family member must live in at least 40% of the home, so the same structure used to buy a home you let out in full is not a regulated home purchase plan. Commodity murabaha sits under the mortgage rules. Property murabaha depends on the contract. The legal test is set out on what a home purchase plan is.

See all ten, with the answers

Diminishing musharaka, completion day. You put in a deposit and the provider buys the rest. The two of you buy the home together under diminishing musharaka. Owner: both of you. Rules: home purchase plan rules. You and the provider buy the home together, as co-owners. Your deposit becomes your opening share of the home.
Diminishing musharaka, year 10 of 25. Ten years in. Every month you have paid rent on the provider’s share and bought a little more of it. Owner: both of you. Rules: home purchase plan rules. Still co-owners. Each payment moves a slice of the provider’s share to you, but it owns part of the home until the last slice is bought. In our worked example you own about 39% at this point.
Diminishing musharaka, after the final payment. The last monthly payment has gone through and you have bought the whole of the provider’s share. Owner: you. Rules: home purchase plan rules. Once you have acquired all of the provider’s share, the home is fully yours.
Ijara, completion day. The provider buys the whole home and leases it to you. You move in. Owner: the provider. Rules: home purchase plan rules. Under ijara the provider owns the whole home and leases it to you. You pay rent to live there.
Ijara, year 12 of 25. Your contract says the home passes to you at the end of the term. Twelve years in, you are still paying rent. Owner: the provider. Rules: home purchase plan rules. You are the provider’s tenant until the home passes to you, and this contract sets that at the end of the term. Until then the provider owns it.
Ijara, end of the term. Your contract says the home passes to you at the end of the term. The term has now ended. Owner: you. Rules: home purchase plan rules. An ijara contract sets out how the home passes to you, over the term or at the end. At the end, it is yours.
Commodity murabaha (tawarruq), completion day. The provider sells you metals at a marked-up price, paid over time. The metals are sold on, and you buy the home with the cash. Owner: you. Rules: mortgage rules. With commodity murabaha you buy the home yourself, so you own it from day one. The provider takes a charge over it.
Commodity murabaha (tawarruq), year 10 of 25. Ten years in, you are still paying instalments of the marked-up price of the metals. Owner: you. Rules: mortgage rules. The provider never owns your home under commodity murabaha. It has been yours since completion; what you are paying off is the price of the metals, and the provider holds a charge over the home.
Property murabaha, before the sale to you. The provider has just bought the home. It has not yet sold it on to you. Owner: the provider. Rules: depends on the contract. In property murabaha the provider buys the home first, then sells it on to you at a disclosed higher price. Until that sale, the home is the provider’s.
Property murabaha, year 5 of the instalments. The provider sold you the home at a disclosed cost plus a disclosed profit. You are paying the price in instalments. Owner: you. Rules: depends on the contract. Legal title passes to you with the sale, and the provider holds a charge over the property while you pay the instalments.

Independent research, not financial advice. This quiz describes how the structures work; it does not say whether any product is permissible.

More games

Spot the structureTen descriptions of a deal. Diminishing musharaka, ijara or murabaha?
Guess the splitHow one home purchase plan payment divides between rent and buying your share, year by year.
Myth or fact: Sharia approvalSharia boards, certificates, regulation and where scholars differ.