Breakdown
How it works
The bank buys the property and leases it to you. Each payment has two parts: rent on the bank's share and an acquisition instalment that buys more of the property. As your share grows, rent falls and acquisition rises — mirroring interest and capital in a repayment mortgage. Profit rates are often fixed for 1–5 years then revert to a benchmark plus margin.
Formula
Worked example
AED 1.5m property, AED 300k contribution, 4.75% over 25 years: AED 6,841 a month (rent 4,750 + acquisition 2,091 in month 1). After a 3-year fix reverting to 6.5%: about AED 8,000.
Frequently asked questions
Is Ijara more expensive than a mortgage?
Rates are usually within 0.25–0.5% of conventional rates; fees can be slightly higher (two property transfers in some jurisdictions, though the UAE and UK exempt the second).
Who insures and maintains the property?
Major structural insurance is the bank's as owner (cost passed through); day-to-day maintenance is the tenant-buyer's.
What happens if I sell early?
You buy out the bank's remaining share at the outstanding amount, usually without penalty beyond admin fees.