With the government recent mandate of 20 per cent discount on stamp duties for Islamic home loans, it is apparent that Malaysia is pushing its tax initiatives forward to encourage more people to use syariah-compliant borrowing.
This new introduction could help syariah-based home loans to beat its 2013 performance where it grew 30 per cent to RM61.9 billion compared to the 10 per cent growth experienced by conventional home financing, Bank Negara data showed.
These policies are part of the government’s many efforts to strengthen the country’s reputation as a leader in the world of Islamic banking.
At RM543 billion as of October last year, the country’s Islamic banking assets are progressing towards the right direction while the sukuk market shines at RM5.9 billion.
These are signs that there is no better time than now for you to consider your banking options that are syariah-compliant especially when looking for financing for your new home regardless your religion.
Just like the broader Islamic finance market, Islamic home loans avoid the payment of interest in the transaction. In Islamic home loans, the bank buys the property for the customer and rents it back to the customer at a mark up, thus avoiding the charging of interest.
The concept used in the contracts in Islamic home financing include Ijarah, Murabaha, and Musharaka. Ijarah or ‘lease’ works when banks buy a property and then leases it to its customers.
Murabaha or ‘profit’, on the other hand means that the bank purchases a property and sells it back to the homebuyer for a profit.
Homebuyer then will pay off the profit through fixed repayments. Musharaka partnership, you buy the property jointly with your financier and gradually buy the bank out of it.
If you’re looking for one of these Islamic home financing options and you’re a Muslim, you instantly enjoy the two-fold advantage of being faithful to Islamic tenets as well as being sound in financial principle. For non-Muslim, choosing syariah-compliant would mean that you are supporting proper ethics in banking and finance. This is made clear through Islamic banking principle of no investment with alcohol, gambling, pornography and even tobacco.
If you’re considering syariah-based home loans, let us help you with your search:
Malaysian banks that offer Islamic home loans
CIMB Islamic – CIMB Islamic offers several home loan products including the commodity Murabahah-based products for homes and Ijarah property financing. These Islamic home loans from CIMB already provide consumers with the 20 per cent discount on stamp duty for new financing and a complete waiver for conversion from conventional loans. Both these products come at competitive profit rates too.
Maybank Islamic – Offers the Home Equity-i that is based on the concept of Musharakah Mutanaqisah or the diminishing partnership through leasing.
This product comes with no early settlement charges and has higher financing eligibility of up to 70 per cent of the homeowner’s gross income.
This loan is available to individuals and joint applicants as well as residents and non-residents.
Maybank is also offering the Musharakah
Mutanaqisah Term Financing-i loan to its customers. This can be used to finance the purchase of property and its tenure is up to 20 years.
Citibank – With the bank’s very own Home Partner-i home loan product that is also based on the concept of Musyarakah Mutanaqisah; Citibank is offering a product with capped rates and also provides flexible payment feature so that no extra fees are paid when early or extra payments are made.
Alliance Islamic Bank – Alliance has two Islamic home financing products.
One is the i-Wish Home Financing-I product that is based on the Bai Bithaman Ajil concept.
They also have the i-Wish Flexi Home Financing-I product that is a flexible Islamic home financing product also based on the Bai Bithaman Ajil concept – a type of deferred payment of interest that can be avoided since the customer will pay the sale price that is actually differs from interest that is charged on a loan.
CIMB Islamic, Maybank Islamic, Citibank, and Alliance Islamic Bank are just some of the banks in Malaysia that offer Islamic home loans.
With these loans, devout Muslims or even non-Muslims who support the principles of Islamic finance now have a home loan option to the traditional home loan products offered by banks. All you need to do now is to begin comparing available syariah-compliant home loans in the market and find the best options that fit your needs.
This content is created by Floyd Sijmons for the readers of Borneo Post. Sijmons is the CEO of CompareHero, the most extensive Malaysian financial comparison platform today. He believes in the value of saving Malaysians time and money by giving them information they need to compare financial products in the market. For more, visit CompareHero.my.
About Floyd
Floyd Sijmons gives you unbiased views on credit cards, loans, even on insurance and home services (like broadband and telcos), along with other financial products in the Malaysian market. So go ahead and ask.