Diminishing Musharaka (Declining Partnership)
An Islamic co-ownership model where you and the bank jointly buy the property, and you gradually buy out the bank's share over time.
What is Diminishing Musharaka (Declining Partnership)?
Diminishing Musharaka (also called Musharaka Mutanaqisa) is an Islamic financing structure based on a declining partnership. The bank and the buyer jointly purchase the property, with the bank typically providing 75-80% and the buyer 20-25%. The buyer then gradually purchases the bank's share through regular payments while also paying rent on the bank's portion. As the buyer's share increases, the rent decreases proportionally, until the buyer owns the property outright.
Diminishing Musharaka (Declining Partnership) in the UAE
Diminishing Musharaka is offered by several UAE Islamic banks and is considered by many scholars to be the most Sharia-compliant form of property financing. ADIB and DIB are among the banks offering this structure. It is popular among buyers who prefer a true co-ownership model over the sale-based structure of Murabaha.
Is Diminishing Musharaka more expensive than Murabaha?
Not necessarily. The effective cost is comparable. The main difference is the legal structure — Diminishing Musharaka is a partnership model while Murabaha is a sale model.
What happens if I default on a Diminishing Musharaka?
As co-owners, the bank retains ownership of its share. Default procedures are similar to conventional mortgages, with the property potentially being sold and proceeds distributed based on ownership shares.