There are three types on how Musharakah Mutanaqisah works. First thing first under Musharakah Mutanaqisah, BIBD and customer agree to contribute Musharakah to co-own a proposed property under construction. For example a BIBD contributes 95% to the construction cost and customer constributes remaining 5% or BIBD will contribute 100% of the construction price and customer contribution will be in kind value such as land. Second way is through Ijarah Mausufah Fi Al-Zhimah. The BIBD will act as a lessor will lease out its shares of the property to the customer (as a lessee). It is based on the undertaking by the lessor to deliver the asset based on agreed detailed property specifications, value and time of availability. After that, customer will pay advanced
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Customer transfer his beneficial ownership in the house as 5% ($5,000) Musharakah Contribution. As for BIBD, they will pays the developer $95,000 as 95% Musharakah Contribution.
MUSHARAKAH FINANCING STEP
Originally, BIBD will appoints the customer as project manager to monitor the progress. Moreover, BIBD also appints customer as an agent to look after the leased asset. As these two will be covered under the construction stage. During construction, BIBD lease its 95% beneficial ownership to the customer under Ijarah Mausufah Fi Al-Zimmah and customer will need to pay advanced rentals.
Once the construction have completed, Ijarah Mausufah Fi Al Zhimmah lease will be converted to normal Ijarah. The first rental will include the total advanced rental payment paid during the construction. Then, customer will buy the Musharakah shares owned by the BIBD on a monthly basis. By the end of financing term, customer ownership will gradually increase whilst BIBD ownership tend to be decrease.
Last but not least is maturity. Upon payment of all BIBD's Musharakah shares by customer, BIBD acknowledge full beneficial ownership transferred to customer at the end of financing
Customer transfer his beneficial ownership in the house as 5% ($5,000) Musharakah Contribution. As for BIBD, they will pays the developer $95,000 as 95% Musharakah Contribution.
MUSHARAKAH FINANCING STEP
Originally, BIBD will appoints the customer as project manager to monitor the progress. Moreover, BIBD also appints customer as an agent to look after the leased asset. As these two will be covered under the construction stage. During construction, BIBD lease its 95% beneficial ownership to the customer under Ijarah Mausufah Fi Al-Zimmah and customer will need to pay advanced rentals.
Once the construction have completed, Ijarah Mausufah Fi Al Zhimmah lease will be converted to normal Ijarah. The first rental will include the total advanced rental payment paid during the construction. Then, customer will buy the Musharakah shares owned by the BIBD on a monthly basis. By the end of financing term, customer ownership will gradually increase whilst BIBD ownership tend to be decrease.
Last but not least is maturity. Upon payment of all BIBD's Musharakah shares by customer, BIBD acknowledge full beneficial ownership transferred to customer at the end of financing