The desire of being home-owner, and therefore the demand for Shari´ah compliant construction financing, is particularly high amongst Muslims. The basic of such Shari´ah-compliant construction financing is also an Islamic financing technique. In praxis, the Murabahah and Ijarah, but also Musharkah are used for that. Murabahah and Ijarah generally work as described at the consumer credits. In Europe, construction financing is also often based on the so-called Diminishing Musharakah concept. In this concept, the client and the Islamic Bank together constitute a Musharakah-partnership for the purchase of the property. The client and the bank jointly contribute the capital for the purchase of the property whereas the capital part contributed by the client should be 25% as rule. The remaining 75% of the required capital is contributed by the Islamic bank. As such, 25% of the Musharakah-partnership is held by the customer and 75% is held by the Islamic bank. Subsequently, the Musharakah-partnership acquires the property. Parallel to the purchase of the property the customer is allowed to use the property and is obliged to pay a monthly instalment to the bank as remuneration. However, these monthly instalments are not conventional interest- and amortization rates paid for typical construction financing. In fact, the instalments consist of two components: the first part is in fact the lease for the Islamic bank in return for the use of its 75% interest in the property. The other component of the instalment is a payment for the acquisition by the client of the shares in the Musharakah-partnership held by the bank. As a result, the shareholding in the partnership held by the client increases and the shareholding held by the bank decreases over the instalment period. Due to the decreasing shareholding of the bank, the monthly instalments payable to the bank decrease correspondingly. Consequently, the client is able to use a bigger amount for the purchase of shares in the partnership each month until the moment that the property fully belongs to the client.

One very important issue needs to be considered in order to be Shari´ah compliant: the respective property has to exist at the moment of purchase. Murabahah, Ijarah and Musharkah can not be applied to properties that have to be built yet. As for the perspective of Islamic Law, the object of contract, in this case the property, has to exist already in reality (i.e. not only on paper) at the time of the conclusion of the contract.