Halal home purchase plans

What is a halal home purchase plan?

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A halal home purchase plan is a financial product designed to help Muslims purchase property without the need to borrow money

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As mortgages by their very nature are interest-bearing, they’re prohibited in the Muslim faith. Home purchase plans on the other hand, aren’t mortgages at all as they don’t require the borrower to pay interest and are therefore Sharia compliant.  

Why do people take out halal home purchase plans? 

Islamic or halal home purchase plans are popular because borrowing and lending money in exchange for interest is forbidden under Sharia law. 

This means that mainstream mortgages are not appropriate for Muslims, who have previously struggled to find ways to get a foot on the property ladder.

Halal home purchase plans are now available from a variety of providers and, like ordinary mortgages, are regulated by the Financial Conduct Authority (FCA). 

How do halal home purchase plans work? 

Halal home purchase plans don’t involve borrowing money. 

Instead, under a Sharia-compliant HPP, your bank will purchase your property on your behalf and then either lease it back to you or levy a profit on top of the purchase price, subsequently allowing you to pay back the sum total in instalments. 

Whichever type of HPP you choose, your provider will make money - but they’ll do so in a way that is in line with Muslim teachings.

Where can I find a halal home purchase plan? 

HPPs are available from a variety of providers including Al Rayan Bank (formerly known as the Islamic Bank of Britain) and UBL UK.

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