Published 25 June 2026 · Updated 25 June 2026

Ijara home finance UAE 2026: how lease-to-own Islamic mortgages work

By Fatima Al Rashid, Senior Mortgage Analyst · 10 min read

What is Ijara home finance?

Ijara (Arabic: إجارة) means "lease" or "hire." In Islamic finance, Ijara is a contract where the bank buys an asset and leases it to the customer for an agreed rental payment over a defined period. At the end of the lease, ownership of the asset transfers to the customer.

Applied to home purchase, the structure works like this: you identify a property you want to own. The bank buys it and becomes the legal owner. The bank then leases the property to you. You pay monthly rental to the bank for the right to occupy and use it. At the end of the agreed term (or progressively throughout, in some structures), you purchase the property from the bank. Once you have made all payments, you own the property outright.

The key feature that makes Ijara Shariah-compliant is that your payments are rental income earned by the bank from a genuine leasing arrangement, not interest charged on a loan. The bank takes on real ownership risk: if the property is destroyed through no fault of yours, the bank (as legal owner) bears that risk rather than passing it to you as a borrower.

How Ijara works: step by step

1. You identify the property and agree a price with the seller. You sign a memorandum of understanding (MOU) and approach an Islamic bank for Ijara home finance. You provide your financial documents and property details.
2. The bank evaluates your application and orders a property valuation. The bank checks your income, employment, credit history, and DBR position. An independent valuer assesses the property to confirm the bank is not overpaying.
3. The bank buys the property from the seller. The title transfers into the bank's name. The bank is the legal owner. This is genuine ownership, not symbolic: the bank holds title and bears ownership risks.
4. The bank leases the property to you under an Ijara contract. You and the bank agree on the rental amount, the term, and how ownership will eventually transfer. Two common structures exist: Ijara wa Iqtina (lease ending in purchase) and Ijara Muntahia Bittamleek (lease with deferred ownership transfer).
5. You pay monthly rental to the bank. The rental is reviewed periodically, typically linked to 3-month EIBOR. As EIBOR moves, your rental payment adjusts.
6. Ownership transfers to you at the end of the term. Depending on the specific contract, ownership may transfer via a separate gift deed (hiba), a promise to sell at a nominal price, or a series of progressive purchases throughout the term (as in Diminishing Musharaka, which is related but distinct).

Ijara vs Murabaha vs Diminishing Musharaka

These are the 3 main Islamic home finance structures used in the UAE. Understanding how they differ helps you choose the right one.

Structures as of June 2026. Products vary by bank. Confirm the specific structure offered with each bank before proceeding.

In practice, Diminishing Musharaka is the most widely used Islamic home finance structure in the UAE today. Ijara is used but is less common for residential mortgages than Diminishing Musharaka. When UAE Islamic banks advertise their home finance products, the underlying structure may be Diminishing Musharaka even if described informally as a "lease" or "rental-based" product. Always ask your bank to specify the exact structure in writing.

For a detailed look at Murabaha, see our Murabaha home finance guide. For a broader overview of Islamic mortgage options, see the Islamic mortgage UAE guide.

Which UAE banks offer Ijara home finance?

The main UAE providers of residential Ijara home finance are:

• Dubai Islamic Bank (DIB): the UAE's oldest Islamic bank and one of the largest globally. DIB offers Ijara home finance across its UAE branch network. See the DIB mortgage guide for current rates and eligibility.
• Emirates Islamic: the Islamic banking subsidiary of Emirates NBD. Emirates Islamic offers Ijara and other Shariah-compliant home finance structures for UAE residents and nationals.
• Sharjah Islamic Bank (SIB): a full-service Islamic bank headquartered in Sharjah. SIB offers Ijara home finance on both conventional and freehold properties across the UAE.
• Al Hilal Bank: owned by Abu Dhabi sovereign fund Mubadala, Al Hilal offers Islamic banking products including Ijara home finance.

ADIB (Abu Dhabi Islamic Bank) primarily structures its home finance products as Diminishing Musharaka rather than pure Ijara, though the term "Ijara" is sometimes used informally to describe any lease-based structure. When comparing products, confirm the exact structure with each bank's relationship manager.

What profit rates are available on Ijara in the UAE?

Ijara profit rates in the UAE are variable and track 3-month EIBOR. The bank adds a margin on top of EIBOR to determine the rental rate charged. The typical structure is:

Rental rate = EIBOR 3M + bank margin

With 3-month EIBOR at 3.69% in June 2026, and bank margins typically running from around 1.00% to 1.50% for strong applicants, total Ijara profit rates are in the range of 3.25% to 5.00% or above depending on the bank, your profile, and the LTV.

The profit rate on your Ijara facility will be reviewed at your repricing date, which is typically every 3 months (aligned to the EIBOR reset). When EIBOR falls, your rental payment falls. When EIBOR rises, your rental rises. This is different from a Murabaha facility where the profit is fixed at contract signing.

To see current rates from UAE Islamic banks, use the live rate comparison and filter by Islamic products. The best Islamic mortgage rates guide covers which banks are currently competitive.

Ijara eligibility: who can apply?

CBUAE regulations on eligibility apply to all UAE home finance products, including Ijara. The standard requirements are:

• Minimum salary: AED 15,000 gross per month for most UAE Islamic banks, with some setting higher minimums for expat applicants.
• Debt burden ratio (DBR): total monthly debt commitments including the new Ijara rental payment cannot exceed 50% of gross income for expats, or 60% for UAE nationals. Use the DBR calculator to check where you stand.
• Maximum LTV: expats can finance up to 75% of the property value on first homes below AED 5 million (25% deposit). UAE nationals can borrow up to 85% (15% deposit). See the full LTV table in our UAE mortgage down payment guide.
• Maximum term: 25 years. The facility must be fully repaid before age 65 if salaried, or 70 if self-employed.
• UAE residence visa: required for standard residential Ijara products as a UAE resident. Non-residents face tighter terms.
• Credit history: a clean AECB credit report is required. Defaults or serious arrears in the past 12 months will typically result in a decline.

Shariah compliance: what makes Ijara halal?

Ijara is Shariah-compliant because the rental payments represent income earned by the bank from genuine ownership and leasing of an asset, not interest charged for lending money. Several conditions must be met:

• The bank must genuinely own the property during the lease period. It cannot simply lend you the money and describe the interest as "rent."
• The rental amount must be known and fixed for each rental period (though it can be reviewed at intervals against EIBOR).
• The bank bears the ownership risks (e.g. major structural damage not caused by the lessee).
• The property must be Shariah-permissible (no impermissible use).
• The arrangement must be reviewed and approved by the bank's Shariah supervisory board.

All licensed Islamic banks in the UAE operate under supervision from the UAE Central Bank and maintain their own Shariah supervisory boards. UAE Islamic banks also follow standards published by AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions), the international body that sets benchmarks for Islamic finance product structures.

Pros and cons of Ijara home finance

Frequently asked questions

What is Ijara home finance?

Ijara (Arabic: إجارة) means "lease" or "hire". In an Ijara home finance arrangement, the bank buys the property you want and then leases it to you for an agreed term. You make rental payments to the bank rather than loan repayments with interest. The bank retains legal ownership during the lease. At the end of the term, or through a parallel purchase arrangement, ownership transfers to you. The rental income replaces interest, making it Shariah-compliant.

What is the difference between Ijara and Murabaha?

In Murabaha, the bank buys the property and sells it to you immediately at cost plus a profit markup. You own the property from day one. Your monthly payment is a debt instalment. In Ijara, the bank buys the property and leases it to you. The bank retains ownership during the lease. Your monthly payment is rent. Ownership transfers at the end (or via a parallel arrangement). Murabaha typically offers a fixed total cost; Ijara rates are usually variable (EIBOR-linked), so your monthly payments can move over time.

Which banks offer Ijara home finance in the UAE?

UAE banks offering Ijara residential home finance include Dubai Islamic Bank (DIB), Emirates Islamic (a subsidiary of Emirates NBD), Sharjah Islamic Bank (SIB), and Al Hilal Bank. Some banks (such as ADIB) offer Diminishing Musharaka rather than pure Ijara. The exact product varies by bank, so always ask whether the product offered is Ijara, Murabaha, or Diminishing Musharaka.

Are the CBUAE mortgage rules the same for Ijara?

Yes. CBUAE regulations on LTV, DBR, maximum term, and age limits apply to all UAE home finance products including Ijara. Expats can borrow up to 75% LTV on first homes below AED 5 million; UAE nationals up to 85%. The maximum DBR is 50% for expats and 60% for UAE nationals. The maximum finance term is 25 years.