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Know the Types of Sharia Property Contracts

Know the Types of Sharia Property Contracts

Sharia property purchases usually use a buying and selling system according to Islamic religious norms. Home transactions that use a Home Ownership Credit (KPR) scheme or direct installments to Sharia property developers usually use an Islamic sale and purchase contract.

But do you know what types of contracts are commonly used in purchasing property or houses? Knowledge of sharia transaction contracts is very important to know, especially when you start or are about to migrate to this Islamic method.

Sale and purchase contracts in Islam generally regulate transactions clearly and in detail so as not to cause misunderstandings between the seller and the buyer. Things like this are sometimes, consciously or not, we ignore in our daily buying and selling practices and in large transactions.

Then what kinds of sharia property contracts can we know? Continue to listen to the following explanation.

1. Murabahah Contract – Sale and Purchase

The most commonly used contract by Islamic banks or developers is the murabaha contract, in which the dominant buying and selling concept is determined by margin. The margin in buying and selling itself is intended at the profit level expected by the financial institution, then expressed in the form of numbers, nominal or percentage.

In the Sharia KPR system, Islamic banks will first buy the house that their customers want. And then the customer who buys the house to the bank with a certain purchase system, for example in installments.

In a murabaha contract, the production price to profit will be determined by the seller and buyer together based on an agreement. So that transparency is built and correct transactions are established.

So it is clear that if you use this contract, the property seller must convey the cost of the house to the prospective buyer. Then the bank and its customers can negotiate fairly.

2. Musyarakah Mutanaqishah Contract – Leasing Cooperation

As for the type of contract of sale and purchase of sharia mutanaqishah, which is carried out between two or more parties between the bank and the customer who agrees to buy an item, for example a residence.

In the system, the two parties work together to buy property, one party (bank) will buy and the other party (customer) buys in stages.

For example, the bank has 80% ownership of the house purchased, while the customer only has 20%. It needs to be underlined, this portion of ownership is carried out by mutual agreement. And afterwards, the customer will buy 80% which belongs to the bank on the house.

These assets will slowly become the property of the customer in full when the installments have been paid in full. And during the installment process, the house can be occupied by the customer with a rental status from the bank.

3. Muntanhia Bittamlik Ijarah Contract

Furthermore, there is the concept of buying and selling property using the ijarah muntanhia bittamlik contract, but this system is quite rarely found or used in sharia banking or developers.

In general, it is almost the same as the musyarakah mutanaqishah contract system which uses the concept of cooperative leasing over property. It’s just that the difference is, the financial institution will fully buy the house purchased. So that customers can then rent the residence and pay the nominal rental that has been determined.

In addition, in this contract the customer will pay a down payment to the owner as collateral. The house rental period takes place based on the agreement. And if the period is up, the customer has the right to choose whether to continue buying the house or not.

4. Ishtishna contract

Different again, this time there is an ishtishna contract which is a type of sale and purchase contract in the property world with the concept of a wake-up call. This means that in this system customers can book plots, order unit construction from developers according to existing agreements and regulations.

In accordance with its definition and purpose, this type of house sale and purchase contract is more widely used by sharia property developers with no bank schemes. And interestingly, the ishtishna contract concept has recently become quite popular and has begun to be widely used by property development circles and sought after by property hunters.

Concept in Ishtishna Contract

The method used in the ishtishna contract is only carried out by 2 parties between the developer and the buyer. Capital under construction is provided by the developer, and housing installments are also paid by the consumer to the developer.

So, what distinguishes the concept of this contract from other types of sharia property contracts is the 100% sharia scheme without banks.

As an illustrative example, sharia property developer A has plans to build an indented housing on a land with a certain area of 60 units. Housing prices per unit reach IDR 400 million for 8 year installments.

And the sharia developer opens wide opportunities for anyone who wants to build a house on that land.

If the consumer is interested in buying and building a house through the developer, the consumer will enter into an agreement with the developer. Among them, consumers pay a down payment with a certain nominal value, and agree on installments with a predetermined tenor.