Islamic banks offer expat property investment loans based on shared ownership

Islamic banks are becoming more popular for expat property loans.

British consumers as well as UK expats living in the Gulf States and other Muslim countries are turning to Islamic banks for residential and buy-to-let mortgages due to their ethical stance. Al Rayan Bank, the UK’s largest and oldest source of Islamic-style financing, has focused on ethically-minded consumers for several years, using a carefully-crafted focus on certain precepts of Sharia law. As a result, around 30 per cent of its clients are non-Muslim and demand for the service has doubled over the last three years.

For UK expats unfamiliar with this aspect of Sharia law, all Islamic banking products must comply with its requirements. Banks are forbidden from investing in certain industries, including companies providing gambling, alcohol, tobacco, arms and weapons of war or any other commodity not representing the faith’s ethical values. Most importantly, interest on loans must neither be charged or paid. For non-Moslems with concerns as to the future of the world, the law supports the principles of fair trading, careful spending, equitable distribution and community wellbeing, thus appealing to non-Moslems as well as to those of the faith.

Islamic mortgages are based on the principles of leasing and co-ownership, with properties jointly purchased by the bank and the mortgagee. The client’s ownership increases with every monthly payment, and rent is paid on the proportion still in bank ownership until the agreed term ends and the buyer assumes full ownership. In this manner, no interest is involved in the transaction. The UK’s Islamic banks have no problems with buy-to-let loans, making it easy for expats living and working in the Gulf States to buy home country property as an investment against an eventual return home. In addition, expats about to leave the UK for a long-term reassignment in the UAE will be able to buy a property under Islamic law.