What is an Islamic mortgage – Kommersant

How Islamic mortgage differs from other mortgage programs, its types and implementation features in Russia – in the Kommersant reference.

Islam prohibits any transactions in which there is interest on loans; this is the sin of usury. Therefore, standard mortgage programs are not suitable for Muslim believers due to non-compliance with Sharia norms.

From September 1, 2023, a two-year experiment on the development of Islamic banking began in some regions of Russia (Dagestan, Chechnya, Bashkiria and Tatarstan), due to which credit institutions were able to provide clients with new products.

According to Shariah rules, instead of a loan with interest, banks can offer installment plans, trust management of assets, and halal investments (for example, interest-free bonds). On August 4, President Vladimir Putin signed a law on special regulation of partnership financing in certain entities, which removes regulatory obstacles for major market players in the field of Islamic banking.

Partnership financing services in accordance with Shariah standards can be provided by legal entities included in the relevant list of the Bank of Russia and members of a self-regulatory professional organization. These can be both credit and non-credit financial organizations – NFOs.

Types of Islamic mortgage

Banks in Islamic countries have created three types of mortgages, which differ in the way they finance the purchase of real estate.

Ijara. This is a rent with subsequent purchase. Each year, the lender reviews the rent to align it with average market prices. The client can buy the property at any time at book value.

Murabaha. The lender purchases the property and sells it to the buyer at a slightly higher price with payments made in installments. Moreover, the contract justifies the size of the markup, and the terms can be revised only with the consent of all parties.

Musharaka. The lender and client own the property together. The financial institution usually leases its share to the borrower, who then buys it back in small installments. In this case, rental payments are reduced in proportion to the share owned by the lender.

Halal mortgage in Russia

Before the adoption of the law on partnership financing, Islamic mortgages in Russia could be implemented with the help of intermediaries. When organizing a halal mortgage, several principles must be followed:

·lack of interest income;

·sharing risks with the borrower;

·compliance with the standards of the Organization for Accounting and Auditing in Islamic Financial Institutions, AAOIFI;

· control over activities by local spiritual institutions.

There have already been several attempts to implement the principles of Islamic finance in the country, including in the field of mortgage lending. In Russia, such loans were provided by Ak Bars Bank and a number of microfinance organizations. In November 2023, Sberbank launched a pilot program for Islamic mortgages in Bashkiria and Dagestan.

In the Republic of Bashkortostan, you can use the Murabaha Mortgage for primary and secondary housing, in Dagestan – only for primary housing. Halal mortgages are available from 300 thousand to 100 million rubles. for a period of up to 20 years with an initial payment of 30%. However, a citizen of any religion can apply for an Islamic mortgage.

Marina Kolokolova