Ijarah is an Islamic finance structure based on leasing. In a property context, the bank buys the property and leases it to the customer, who pays rent over a term and ultimately acquires ownership a Sharia-compliant alternative to a conventional interest-based mortgage.
Where you’ll see it
You’ll see Ijarah offered by Islamic banks as a home-finance product. Rather than lending money at interest, the bank owns the asset and leases it, with payments structured so that ownership transfers to the customer at the end.
Why it matters
For buyers who require Sharia-compliant finance, the structure matters as much as the cost. Understanding that the bank holds an ownership role during the term and how and when full ownership passes helps buyers compare Ijarah with conventional and other Islamic products.
What it is not
Ijarah is not a conventional interest-bearing mortgage, and it differs from Murabaha, another Islamic structure based on a cost-plus sale rather than a lease. The legal mechanics differ even where the monthly cost looks similar.
Example
An Islamic bank purchases a property and leases it to the buyer under an Ijarah; the buyer pays agreed instalments over the term, and ownership transfers to them on completion of the payments.
Connected documents and parties
Ijarah agreement, lease and ownership-transfer terms; buyer, Islamic bank, DLD.
Going deeper: related reading: Murabaha.
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Last reviewed: June 2026