Murabaha: Cost-Plus Financing
Achieving competitive leverage while strictly adhering to Islamic finance principles.
Murabaha is a non-interest-bearing financing structure widely used for commercial real estate acquisitions. Instead of a lender providing a loan and charging interest (Riba), the financier acquires the property and immediately sells it to the investor at a predetermined markup.
The Mechanics
1. Acquisition
The Shariah-compliant financier purchases the specific real estate asset identified by the investor.
2. Sale & Markup
The financier immediately sells the asset to the investor at cost plus an agreed-upon profit margin.
3. Deferred Payment
The investor pays the total marked-up price in installments over a fixed term.
This structure fixes the cost of capital upfront, removing uncertainty (Gharar) and complying fully with AAOIFI standards.