Finance & Mortgage · 7 min · 2026-10-23

Islamic Home Finance in the UAE: Ijara, Murabaha and the Rules That Apply

Islamic home finance replaces interest with a profit rate and uses structures such as Ijara and Murabaha. The CBUAE limits on LTV, DBR and term still apply.

Islamic home finance in the UAE lets you buy a property through a Shari'ah-compliant structure instead of an interest-bearing loan: the provider earns a profit rate rather than interest, typically through structures such as Ijara (lease to own) or Murabaha (cost-plus sale). Article 6 of the UAE Central Bank "Regulations Regarding Mortgage Loans" (Circular 31/2013) states that providers offering Shari'ah-compliant finance must follow the specific requirements of their Shari'ah advisory committees and also comply with the same regulations as conventional lenders. So the LTV, DBR, term and income limits are identical.

The key idea: profit, not interest

In a conventional mortgage, you borrow money and pay interest on it. In Islamic home finance, the transaction is built around the property itself, through ownership, leasing or sale, and the provider's return is called a profit rate or rental rate. Article 4 of the regulation refers to "interest rates (or profits)", and requires the method of calculating interest or profit to be disclosed transparently.

For the buyer, the practical questions stay the same: how much can I finance, what is the monthly payment, and what is the total cost?

Ijara: lease to own

Ijara is a leasing structure, explained here in general terms:

• The provider acquires the property, or a share of it, at your request.
• You lease it and pay a regular amount that combines rent and a contribution toward acquiring the provider's share.
• At the end of the term, ownership passes fully to you.

The rental component is often reviewed periodically according to the contract. Read your documentation to see how and when it can change.

Murabaha: cost-plus sale

Murabaha is a sale structure, again in general terms:

• The provider buys the property.
• It sells it to you at the purchase cost plus an agreed profit margin.
• You pay the agreed sale price in instalments.

Because the sale price is agreed at the start, the payment profile is usually known from day one. Each provider designs its own products under its Shari'ah committee's guidance, so the exact features vary. Ask your provider which structure it uses and how it works.

The same CBUAE limits apply

Article 6 is clear that the general regulations must be complied with when financing under Shari'ah principles:

Worked example: AED 1.2 million financing

An expatriate first-home buyer finances AED 1,200,000 on a AED 1,500,000 property, at an example profit rate of 4% over 25 years, with an amortising payment profile.

The arithmetic matches a conventional loan at the same example rate. What differs is the legal structure and the contract terms. Compare offers on the total cost over the full term, which Article 4 requires every provider to disclose.

Questions to ask a provider

• Which structure do you use, Ijara, Murabaha or another?
• How is the profit or rental rate set, and when can it be reviewed?
• What is the early settlement policy and fee (Article 4 caps apply)?
• What insurance or takaful is required?
• What is the total cost over the life of the financing?

Early settlement and refinancing

Article 4 applies to Islamic finance in the same way as to conventional loans. Your contract must include a clear pre-payment policy, fees must be listed in a separate schedule, and the maximum early repayment or refinancing charges are the actual cost to the provider and/or the fees set out in Regulations No. 29/2011. The provider cannot change the terms during the tenor without your written consent, and fee changes require at least two months' notice.

Because the legal structure differs, the settlement mechanics can differ too. In an Ijara, for example, settling early usually means buying the provider's remaining share. Ask your provider to explain the steps in writing.

FAQ

Is Islamic home finance only for Muslims?

No. Shari'ah-compliant products are generally open to all eligible applicants. Ask your provider about its eligibility criteria.

Is the profit rate the same as an interest rate?

Economically it plays a similar role in the monthly payment, but the legal structure is different. Article 4 requires the calculation method to be disclosed.

Can I refinance Islamic finance?

Yes. Article 4 says there should be no impediment to refinancing, and early repayment charges are capped.

Is the maximum LTV different for Islamic finance?

No. Article 6 applies the same regulation, so the Article 3.2 LTV limits are the same.

Next steps

Read the guide to Islamic home finance, see how mortgage repayments work, and calculate your payment with the mortgage repayment calculator. Thinking about switching later? See the mortgage buyout guide.

Calculators for this guide: Mortgage calculator Dubai & UAE · Dubai mortgage for non-residents · Off-plan calculator Dubai

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