The diminishing musharakah based on the above concept has taken different shapes in different transactions. Some examples are given below: 1. It has been. FREE VIDEO LECTURE and Study Notes on Diminishing musharakah. It is used for Islamic Mortgage & also for shariah based financing of car, business, etc. Diminishing Musharakah MBL. 1. Diminishing Musharakah Outline • Diminishing Musharakah - Introduction • Basic Structure • Shariah.
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The client wants to purchase a house for which he does not have adequate funds. He approaches the financier who agrees to participate diminishing musharakah him in purchasing the required house.
Diminishing Musharakah - Financial Islam - Islamic Finance
After purchasing the property jointly, the client uses the house diminishing musharakah his residential requirement and pays rent diminishing musharakah the financier for using his share in the property.
The client promises to the financier that he will purchase one unit after three months. Hence, the rent payable to the financier is also reduced to that extent.
The diminishing musharakah of islamic diminishing musharakah financing through Diminishing Musharakah Islamic banks can use Diminishing Musharakah in various cases: While, the client pays rent to the bank for the usage of its share of the property until the client has acquired the complete ownership.
At that time the ownership of the property will be transferred to the client as the sole owner. The steps involved in a Diminishing Musharakah in the case of the purchase of a house are as follows: First the client approaches an Islamic bank for the purchase of the property that he already identified; he agrees to invest a certain diminishing musharakah towards the purchase and applies to the bank for financing the balance amount.
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If the bank is satisfied about the title to the house and the future cash flow of the client, a Diminishing Musharakah agreement is created in diminishing musharakah of which the client and the bank become co-owners in the house on the basis of shirkah al-milk.
The vendor of the property sells it directly to the bank, in which the legal title diminishing musharakah the property is vested; and the client as the eventual owner has immediate rights to occupation.
The two parties agree at the start that their respective shares diminishing musharakah the property shall be pro-rata, concerning their contributions towards the purchase price paid to the vendor.
The parties also agree that during the course of their partnership, which has an agreed date of termination, the client will purchase the financier's share in the property in instalments and for the price that the financier had paid for such diminishing musharakah on the initial date of acquisition.
As the client increases its share in the property, the bank's share correspondingly decreases by the same amount.
In parallel to the Diminishing Musharakah agreement, the bank grants to the client a lease in respect of its share in the property. And Diminishing Musharakah is now being used extensively in many diminishing musharakah for financing fixed assets such as houses and diminishing musharakah cars.
When used in home financing, Diminishing Musharakah can be viewed as a form of shared ownership with a leasing sale-back arrangement, which makes it different from an interest-based mortgage.