Murabaha (Islamic Cost-Plus Financing)

An Islamic financing structure where the bank buys the property and sells it to you at a disclosed profit margin, paid in installments.

What is Murabaha (Islamic Cost-Plus Financing)?

Murabaha is one of the most common Islamic financing structures used for property purchases in the UAE. Under Murabaha, the bank purchases the property on your behalf and then sells it to you at a higher price (cost plus an agreed profit margin). You pay this higher amount in installments over the agreed tenure. Unlike conventional mortgages, there is no interest — the bank's profit is built into the sale price, making it Sharia-compliant.

Murabaha (Islamic Cost-Plus Financing) in the UAE

Murabaha is offered by all Islamic banks in the UAE (Dubai Islamic Bank, Abu Dhabi Islamic Bank, Emirates Islamic, Sharjah Islamic Bank, etc.) and by the Islamic banking windows of several conventional banks. UAE Islamic financing products are supervised by each bank's Sharia Supervisory Board. The effective cost is typically comparable to conventional mortgage rates, though the legal structure is fundamentally different.

Worked Example

Property value: AED 2,000,000. Bank purchase price: AED 2,000,000. Agreed profit margin: 4.5% per annum over 25 years. Total sale price to you: approximately AED 3,500,000. Monthly installment: approximately AED 11,667. The bank owns the property until you complete all payments.

Is Murabaha the same as a conventional mortgage?

Structurally, no. In Murabaha, the bank buys and resells the property at a profit. In conventional mortgages, the bank lends money at interest. The monthly payments are often similar, but the legal framework is different.

Can non-Muslims use Murabaha financing?

Yes. Islamic financing is available to all nationalities and religions in the UAE. Many non-Muslims choose it for its transparency and fixed-cost structure.