Islamic home finance in the UAE
Islamic home finance in the UAE is usually an Ijarah or a Murabaha, not an interest-bearing loan. The bank's profit is agreed in the contract. Central Bank loan-to-value ceilings still apply. We can ask the Islamic banks on our panel for a figure, and we do not reprint their profit rates on this page.
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Ijarah and Murabaha
Under an Ijarah the bank buys the property and leases it to you. The payments include a profit, and ownership passes to you at the end if the contract says so. Under a Murabaha the bank buys the property and sells it to you at a disclosed cost plus profit, which you pay in instalments.
Neither contract quotes an interest rate. A profit rate and an interest rate can be put side by side only after both offers are in writing. We will not pretend they are the same number.
Lenders people ask us to include
The Islamic names on our panel are Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates Islamic, Ajman Bank, Al Hilal Bank and ADCB Islamic. Buyers also ask about Mashreq Al Islami, Standard Chartered Saadiq, CBD Al Islami and RAK Islamic. Those are Islamic windows of banks that are already on the panel. We treat them as part of that comparison, not as a separate promise.
The Central Bank loan-to-value and debt-burden rules apply to these facilities as they do to a conventional mortgage. The product is different. The ceiling is not.
Questions
An Ijarah or a Murabaha does not charge interest. The bank is paid an agreed profit. That profit has a cost, and it should be compared with a conventional offer in dirhams over the same term, not by assuming the word interest-free means cheaper.
The Central Bank of the UAE caps the loan-to-value. For a first home you live in, the ceiling is 85% for a UAE national and 80% for an expatriate when the property is AED 5 million or under, and 75% or 70% when it is above that. A second home or an investment property is capped at 65% for a UAE national and 60% for an expatriate. Off-plan purchases are capped at 50% for every buyer. These are ceilings. A bank can ask for a larger deposit.
The panel includes Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates Islamic, Ajman Bank, Al Hilal Bank and ADCB Islamic. We work with every major UAE lender, and the Islamic windows of the conventional banks on that list can be included in the same comparison.
No. A profit rate moves, and printing one here would present it as fact. Ask an adviser for the figure the bank will put in a contract this week.