What you need to know

Home Finance

There is a halal alternative: Ijarah home finance. Crescent Finance is the answer.

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Most traditional home loan products available in Australia are not Shariah-compliant

How Ijarah home finance works

Ijarah home finance works differently to a traditional home loan. An Ijarah loan enables you to pay rent and not interest in order to acquire ownership of a property.

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Shared relationship

Crucially with Ijarah home finance, no interest (or ‘riba’) is involved. The lender earns a profit in other ways, and the relationship differs from a lender/borrower relationship.

Crescent Finance Options

To illustrate this, let’s look at the two forms of home finance that Crescent Finance offers:

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Crescent Growth Fund

This employs the Islamic concept of Musharakah, which is a form of co-ownership between the home buyer and the financial institution. Effectively, both parties agree to invest in a property and buy the home together. So, the home financing is structured as an investment in which both parties share profit and loss.  

Ownership under this Crescent Finance model is held by a special purpose vehicle – our partner Domacom’s platform allows for fractional ownership of property – with the home buyer listed as a “tenant in common” along with a professional trustee. The home buyer then buys out Crescent Finance’s stake in the property, while paying a fee to use the part of the property still owned by Domacom.

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Crescent Income Fund

This employs the Islamic concept of Ijara, which is basically a lease-to-own arrangement. Crescent Finance purchases the property and the home buyer rents it.

A portion of each rental payment goes toward the tenant’s future ownership of the property. The home is registered in the buyer’s name when repayment is complete.