1.     The customer chooses the property in the normal way and applies to the bank to purchase the property.

2.     The bank instructs its nominated valuers to value the property and its solicitors who will oversee and advise the customer’s appointed solicitor to perfect the purchase of the property in the bank’s name.

3.     Provided the application meets IBB criteria, the bank will purchase the property from the seller at the price agreed between the seller and the customer. Both the customer and the bank contribute towards the purchase of the property (e.g. 70% from the bank and 30% from the customer). The purchase transaction is completed and the bank will hold the legal title of the property in its name.

4.      Simultaneously the bank enters into two agreements with the customer:

·        The first is a lease agreement (Ijara) under which the bank agrees to let the property to the customer for an agreed term of years, during which rent will be paid on a monthly basis (rent amount will be reviewed every six months). 

·        The second is the Diminishing Musharaka Agreement where the customer will be committed to buy the Bank’s share of the property at the same purchase price for a monthly payment. The equity in the property increases (in the customer’s favour) with every payment made towards acquiring the bank’s share. Thus, the amounts of rent payable by the customer will be reduced as his share increases.

·         The customer also agrees to mortgage the lease contract and his share in the property to the bank to secure the rental payments.

5.     In due course, after the entire bank’s share has been bought and all rent has been paid under the lease, the bank transfers the property’s legal title to the customer.