Ijara (Islamic Lease-to-Own)
An Islamic financing arrangement where the bank buys the property and leases it to you, with ownership transferring after the final payment.
What is Ijara (Islamic Lease-to-Own)?
Ijara (meaning 'to rent' in Arabic) is an Islamic financing structure where the bank purchases the property and leases it to you for an agreed period. You pay rent to the bank, and at the end of the lease period, the property ownership transfers to you. The rent may include a component that goes toward purchasing the property over time. Ijara is considered one of the purest forms of Islamic financing as it avoids any element of interest.
Ijara (Islamic Lease-to-Own) in the UAE
Ijara is offered by major UAE Islamic banks including ADIB, DIB, and Emirates Islamic. It is particularly popular for commercial properties but is also used for residential financing. In the UAE, Ijara structures must be approved by each bank's Sharia board. The effective cost is competitive with both Murabaha and conventional mortgages.
How is Ijara different from Murabaha?
In Murabaha, the bank sells you the property at a profit. In Ijara, the bank leases it to you and transfers ownership at the end. Both are Sharia-compliant but use different structures.
Who is responsible for property maintenance in Ijara?
Typically, the lessee (you) handles routine maintenance, while the bank (lessor) may be responsible for structural repairs, though this varies by agreement.