This document proposes an interest-free housing investment model based on diminishing musharaka. It aims to provide Muslims in the UK an alternative to conventional mortgages to purchase homes through non-riba loans and give investors an opportunity for interest-free returns. The model involves investors funding a property purchase, with the buyer gradually increasing ownership through monthly installments and rental payments until owning it completely after a predefined period. It also discusses synthetic diminishing musharaka as a viable Islamic financing structure that behaves like a normal mortgage but provides investors returns comparable to buy-to-let.

1. Interest-Free
Housing &
Investment
Based on “Diminishing Musharaka”

2. Mission Statement
• As per European Council for Fatwa and Research's
Resolution 2/4 on "Permissibility of conventional mortgage
under necessity“ its obligatory on all Muslims to do their
utmost to seek Islamic alternatives to fund their housing
need
• We offer an alternative solution to the conventional
mortgages to enable Muslims in UK to Purchase house
with non-riba loan
• This will also provide Muslim investors an opportunity for
interest-free returns at par or better than conventional
returns on investments incl. buy to let investment.

3. How it works ?
• Win win situation for both borrower and lenders as borrowers will
pay rent equivalent to market price and lender will get return at par
or better than traditional investment incl. buy to let
• Buyer selects a property for housing and investors will fund the
purchase.
• Multiple investors will fund the property (Crowd Funding)
• Investors and buyer share returns through monthly rental income
based on their respective shares in the house
• Buyer’s will pay predetermined installment & share of the rental
income to increase his ownership in the house
• Over a predefined duration buyer’s share will grow to 100% and
investor’s share will reduce to zero at which stage the title deed of the
house is transferred to the buyer

4. Crowd Fund
Portfolio
Rent +Capital
payment
Full
payment
ownership
increase
Down
payment
Investment
BuyerInvestors
Profit Re
invest
Dividends

5. •In MORTGAGE
borrower pays interest
on outstanding
principal amount and
capital in total
•Lender has no share
in increase or decrease
in the value of the
property
•Monthly mortgage
instalments are largely
fixed (except for
change in interest rate
which can be fixed for
a long period). Also
the overall cost of
financing is largely
know and fixed
•In a true diminishing
Musharaka, investors
receive rent in
proportionate of their
outstanding
investment (principal
amount)
•Investors also receive
share of increase in
property value (or
share loss)
•As a result monthly
instalment and over all
price to be paid by the
buyer is variable.
Buyer may face a
continuously changing
goal post as price keep
changing
•It may take longer to
pay
•Synthetic
Musharaka is based
on the idea of
perpetual investment
of rent & principal
repayments into further
properties.
•As the properties will
multiply, investors will
gain from additional
rental yield’s and
principal repayment
from properties that
didn’t constitute
original property
portfolio (snowball
affect).
•Synthetic Musharaka
portfolio will generate
returns far in excess of
diminishing Musharaka
and buy to let
investment.

6. Perpetual investment
1,350,000 1
2,403,250 2
3,743,733 3
- 4
New
investment
Year
As per target, after year 3, organic growth will drive
investors share, without any new investment from
investors, portfolio will continue to grow

7. Short and long term Plan
• It will be CROWD FUNDING model to allow investor to start investing from
as little as £50.
• Mass contact campaign to be launched through various platforms like web,
mosques and through community leaders.
• Board of advisory will be appointed to foresee investment portfolio.
• Buyers will be served on 1st come 1st serve basis.
• Investors will be allowed to liquidate there shares through secondary market.
• Investor profit and capital will be reinvested in portfolio, organic return will
allow us to buy additional property just using reinvested amount
• Recycling of return will create a loop where original investment will fund
new properties.
• Once enough funding will be generated, this fund aims to build own houses
at discounted price for community.
• Inshallah, this platform will not only be financial tool but will serve
community to produce leaders.
• We will be funding peoples to study in oxford & Harvard, will produce
technology leaders, thinkers and politicians to shape and influence the
society.

8. FAQ
• How is it different to Al Ryan bank
• Al Ryan bank don’t share profit and loss, they only interested in their capital repayment and profit,
due to their bench marking borrower usual pay more than market rent
• Can investor withdraw their money
• Yes, investor can offload their share of the fund, they can sale their share on this platform
• What if buyer couldn’t keep re payment
• House will be repossessed and if no other takers available, it will be off loaded in the open market,
profit and loss will be split between investors and buyers proportionally
• Is it open for whole UK
• For few years, our focus is on South East only
• Is their any restriction on buyer or investors
• Buyer has to qualify through usual credit check and affordability test, investment is open for EU
residents only
• Special purpose vehicle
• It is not possible for more than four people to be listed on a UK land registry deed, as such each
property in this fund will be owned by a special purpose vehicle (“SPV”), which will be UK Limited
Company, that you can then in turn buy shares in. There is a different SPV for each and every
property; therefore you will always know that you are investing in a specific property chosen by
you.
• What if this fund dissolve
• Each property investment will be separately ring-fenced from the assets and liabilities of,
as well as any other property investments on the platform.
• If this fund fall into financial distress an alternative manager could be appointed to continue
management of the assets in accordance with the terms of investment.
• Any funds held in your account not invested in property will held in a client monies bank
account in accordance with FCA rules. Separate bank account that is ring-fenced from the
monies of this fund and will be returned to investors in the event of fund falling into financial
distress

9. Appendices

10. Borrower: Diminishing Musharaka vs. Mortgage
•In general diminishing Musharaka tends to be more expensive then
traditional mortgage.
•In mortgage borrower pays interest on outstanding principal amount
and capital in total
•Lender has no share in increase or decrease in the value of the property
•As a result monthly mortgage instalments are largely fixed (except for
change in interest rate which can be fixed for a long period). Also the
overall cost of financing is largely know and fixed. Buyer has a certainty of
paying debt within a certain time period.
•In a true diminishing Musharaka, investors receive rent in proportionate
of their outstanding investment (principal amount).
•Investors also receive share of increase in property value (or share loss).
•As a result monthly instalment and over all price to be paid by the buyer
is variable. Buyer may face a continuously changing goal post. It may take
an extended period of time to completely own the property.

11. Synthetic Diminishing Musharaka
• A true commercially viable Islamic house financing product should
replicate characteristics of a traditional mortgage from the perspective
of borrower but should provide returns to investor equivalent to or
exceeding buy to let property investment.
•Borrower should only pay fixed monthly instalment and should have
ability to repay all the principal over a fixed period of time
•Borrower should retain full risk/reward relating to increase/decrease
in value of the property.
•On the other hand, investors should get returns comparable to buy to
let investments with full exposure to increase/decrease in the value of
the property.
•This will give rise to truly commercially viable Islamic product.
• We have proposed the idea of synthetic diminishing Musharaka that
will behave like a normal mortgage for the borrower but will provide
returns to investors which are comparable to buy to let property

12. Synthetic Diminishing Musharaka (contd..)
•Synthetic Musharaka is based on the idea of perpetual investment of rent &
principal repayments into further properties.
•As the properties will multiply, investors will gain from additional rental
yield’s and principal repayment from properties that didn’t constitute original
property portfolio (snowball affect).
•Our calculations have showed that such synthetic Musharaka portfolio will
generate returns far in excess of diminishing Musharaka and buy to let
investment. With the added advantage that it will exactly behave like a normal
mortgage product for the borrower. With the added advantage to the investors
that risks (buyer default/property vacancy etc) will spread across large number
of properties. (i.e. In addition to the properties originally invested in).
•The risk of synthetic Musharaka portfolio will correlate to wider property
market and buy to let investments and shall not create any additional risk for
the investors or the borrowers.
•Please refer to appendices & detailed model and calculations.

13. Investor: Buy to let vs. Diminishing
Musharaka Investment
• Buy to let is normally a leverage investment which is financed by mortgage.
•Interest is paid on leverage portion, which is funded from rental returns.
•Over the life of mortgage, majority of rent is used to pay mortgage (principal
plus interest) payments with little or no profit accruing to the investor (after
tax, maintenance and charges).
•However tenants who effectively pay the mortgage never owns the property.
•Its can thus be said that investor return at the end of mortgage period is a
fully owned property that can either be sold or further rented.
•In diminishing Musharaka investor get back principal, rent & share of
increase /decrease in property price in proportion of their outstanding
(diminishing) ownership. They don’t own the property at the end of the
investment period. Tenant gets the ownership of the property.
•Buy to let investment yield higher returns as compared to diminishing
Musharaka.

14. Appendix A: Synthetic Musharaka Borrower
ISLAMICMUSHARIKABUTNOCAPITALAPPRECIATION CHARGEDTOBORROWER
Property cost 500,000 Assumptions:
Total Rental Income 295,092 a) Profitis calculated as rental value in proportion of ownership
Total Payment 795,092 b) Annual rental yield % 4
Period 25 Years c) Annual % increase in rent 2
d) Noincrease in property value charged toborrower
Total MonthlyInstallment
Princpal Repaymentpermonth 1,667
Monthly Rent 983.64 Monthly Installment
2,650.31

15. Appendix B: Buy To Let Investment
BUY TO LET INVESTMENT
Investment/deposit -
Interest Rate 3.80%
Property Cost 500,000
Starting Annual rent % 4
Annual % increase in rent 2
Annual % increase in property value 3
Interest Expense 275,000
Rent 640,606
5% agent fee 32,030
Repair& maintenance etc 25,000
Saving from rent after capital repayment 191,424-
Property value at the end of 25 years 1,016,397
Total Gain after 25 year's 824,973
Gain is mainly a property worth £1M.

16. Appendix C: Ordinary Mortgage

17. Quran on Interest
• And God has permitted trade and forbidden usury (riba)
(Quran 2:275)
• O those who believe, fear God and give up what still
remains of the usury if you are believers. But if you do
not, then listen to the declaration of war from God and
His Messenger. And if you repent, yours is your
principal. Neither you wrong, nor be wronged. (Quran
2:278-279)
• The Apostle of God cursed the one who collected usury
(riba), the one who paid it, the two witnesses to the
transaction and the one who recorded it.
• Musharaka is an Islamic way of finance wherein a
business partnership is created instead of a lender-
debtor relationship. Each party shares in both the profit
and the risk of the business. Lender will gain profit from
the business' success rather than from the interest
charged from the loan.

18. Key Considerations
• A technology platform that allows investors to make indirect investments in property, and
subsequently sell those investments, for which we charge a one-off fee of 2% at the point funds are
invested.
• The value of investment can go down as well as up. Forecasts are not a reliable indicator of future
performance. Gross rent and dividends may be lower than estimated
• Monthly Rental Value will be established on the basis of rental/lease rate of a similar house in
similar area.
• Member occupant will be responsible for house insurance, repairs and maintenance.
• Member occupant will be responsible for paying registration charges at the time of property transfer
• The taxable profit made by the SPV is subject to corporation tax, which the SPV will pay directly to
HMRC. The corporation tax rate in the UK is currently 20%, however following the 2015 summer
budget this is set to reduce to 19% in April 2017, and to 18% in April 2020. In addition, should the
property price increase, corporation tax is payable on the gain on disposal. This future corporation
tax liability is recognised in the valuation of the SPV and is called deferred tax.
• Post April 2016, the 10% dividend tax rate will be abolished for UK taxpayers from April 2016, and a
£5,000 annual dividend allowance will be introduced instead. Anyone who invests less than around
£150k in share investments will pay no tax on their dividends (assuming a dividend yield of
approximately 3%). This means investors will pay less (if any) tax on their dividends.
• Stamp Duty Reserve Tax is an amount payable to HM Revenue & Customs for acquiring shares in
property investments on the secondary exchange (i.e. Resale opportunities). The amount payable is
0.5% of the cost of those shares.
• Each property will be owned by SPV (Special Purpose Vehicle) which will be a public limited
company, benefits of which are:
• Investor will always know which property he/she is investing in
• Potential tax savings
• Changing ownership is easy
• SPV acts as a separate legal entity to sponsor firm hence isolates financial risks in the event of
bankruptcy