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Home Financing Under Diminishing Musharakah

What is the method of home financing under a Diminishing Musharakah?

Home financing under Diminishing Musharakah is as follows:

The bank and the client contract a Musharakah agreement under which the property is purchased, with each party contributing a specified percentage of funds. The bank subsequently sells its share of the property to the client in installments spread over a number of years.

The bank’s earnings will be accounted for yearly and will be calculated on the basis of usufruct of its share of the property that is in the client’s use. In case of default by the client, the bank will have the option of either selling the property in order to realize its share in the investment, or annulling the transaction.

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