So I'm here in Germany and as far as I know there's only one bank that offers buying real estate through a murabaha arrangement.
They offer two models:
1) Financing for max. 10 years
2) Financing for more than 10 years (max. 30)
The 10 year one seems to be pretty basic murabaha, but it is not really interesting, because 10 years is not realistic. For the 2nd option however, I don't quite understand the procedure. So I was wondering if anyone of you knows what it entails. I translated the main info from the "islamic certificate" to English:
"The procedure
1. the customer expresses his interest in real estate financing to the bank.
2. the client signs the framework agreement with the bank.
3. the bank establishes a company (GbR) with the customer and a third party for the purpose of real estate financing.
4. the real estate is purchased in the name of the GbR and the purchase price is paid.
5. The Bank sells its shares in the company to one of the partners (the Customer) under the agreed conditions, and the Bank's entire shares in the company become the property of the Customer.
6. at the end of 10 years, the bank gives the customer the option to settle the balance by a one-time final installment or to refinance it through a tawarruq transaction.
B. The Islamic law contract
The contract in this commercial transaction with the procedure described above constitutes a corporate contract (Muscharaka). Through this contract, the bank establishes a company (GbR) with the customer for the purpose of acquiring real estate in the name of the company. Subsequently, the bank sells its shares in the company to the customer with an agreed profit mark-up and a fixed period for the payment of installments. C. The view of the Ethics Board The Ethics Board of KT Bank AG in Germany has analyzed the structure and content of real estate financing with a long term (over 10 years) by means of the establishment of a GbR, sale of shares in the company of the bank to the customer, installment repayment of the company purchase price and subsequent optional Tawarruqs and has come to the conclusion that this form of real estate financing is permitted."
Don't worry about the GbR part. They create a company with you, so the real estate transfer tax has to be paid only once.
What I am wondering mainly is, what does this part mean: "at the end of 10 years, the bank gives the customer the option to settle the balance by a one-time final installment or to refinance it through a tawarruq transaction."
Does this mean the murabaha ends after 10 years and then you go on with some other model? Can anyone explain me what an example of such a tawarrua transaction might be?
And another question: do you know why they want to have a "third party" as part of the company shareholders?
Sorry for the long essay...
They offer two models:
1) Financing for max. 10 years
2) Financing for more than 10 years (max. 30)
The 10 year one seems to be pretty basic murabaha, but it is not really interesting, because 10 years is not realistic. For the 2nd option however, I don't quite understand the procedure. So I was wondering if anyone of you knows what it entails. I translated the main info from the "islamic certificate" to English:
"The procedure
1. the customer expresses his interest in real estate financing to the bank.
2. the client signs the framework agreement with the bank.
3. the bank establishes a company (GbR) with the customer and a third party for the purpose of real estate financing.
4. the real estate is purchased in the name of the GbR and the purchase price is paid.
5. The Bank sells its shares in the company to one of the partners (the Customer) under the agreed conditions, and the Bank's entire shares in the company become the property of the Customer.
6. at the end of 10 years, the bank gives the customer the option to settle the balance by a one-time final installment or to refinance it through a tawarruq transaction.
B. The Islamic law contract
The contract in this commercial transaction with the procedure described above constitutes a corporate contract (Muscharaka). Through this contract, the bank establishes a company (GbR) with the customer for the purpose of acquiring real estate in the name of the company. Subsequently, the bank sells its shares in the company to the customer with an agreed profit mark-up and a fixed period for the payment of installments. C. The view of the Ethics Board The Ethics Board of KT Bank AG in Germany has analyzed the structure and content of real estate financing with a long term (over 10 years) by means of the establishment of a GbR, sale of shares in the company of the bank to the customer, installment repayment of the company purchase price and subsequent optional Tawarruqs and has come to the conclusion that this form of real estate financing is permitted."
Don't worry about the GbR part. They create a company with you, so the real estate transfer tax has to be paid only once.
What I am wondering mainly is, what does this part mean: "at the end of 10 years, the bank gives the customer the option to settle the balance by a one-time final installment or to refinance it through a tawarruq transaction."
Does this mean the murabaha ends after 10 years and then you go on with some other model? Can anyone explain me what an example of such a tawarrua transaction might be?
And another question: do you know why they want to have a "third party" as part of the company shareholders?
Sorry for the long essay...