This facility is provided to a family that wants to build a house for its own occupancy. The family is asked to buy the land and pay fully for it in cash. Then, the family would discuss the design and construction plans and costs with the LARIBA Islamic finance company to decide on a plan of action. The builder should have prior proven experience in building homes successfully in the same general neighborhood.

There are two approaches:

Joint Venture:

1. The family and the company enter a joint agreement (musharaka). Whereby the family would contribute the land, and may be additional cash, and the company provides the needed additional cash to complete the project within an agreed upon budget. The distribution of profit/loss between the two parties after building the house and appraising it is agreed upon through negotiations.
   
   

2. Money is disbursed against a pre-agreed upon construction plan and timetable and against actual documents.
   
   

3. A professional appraiser appraises the market value of the house. The profit/loss is divided between the two parties as was agreed.
   

4. The construction financing facility can be converted in a regular house financing facility using the Lease-To-Purchase model. 

Trade Financing of Material and Construction Facilities:

1. The family and the company enter into an agreement whereby the company will buy the lumber, concrete, materials and all other items needed to build the house.
   
   

2. The family building the house would agree to buy these construction materials and other necessary items back from the company using the Cost-Plus (CP) (murabaha) model. The two parties, through negotiations, agree upon the profit.

The construction financing can be converted into a regular home financing using the Lease-To-Purchase (LTP) model.

LARIBA.com is an Equal Housing Opportunity Finance Company

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