Home Financing Research Articles

The impact of inflation on Islamic banks’ home financing risk: Before and during the COVID-19 outbreak

The COVID-19 outbreak has had a severe impact on nearly all industries, including Islamic banking, which plays a significant role but is exposed to higher risk. This study aims to evaluate the credit risk that Islamic banks in Indonesia have been exposed to related to home financing before and during the COVID-19 outbreak. Panel data are employed covering the period January 2016 to September 2020 on a monthly basis. The data were analyzed using a dynamic panel approach to present a distinct picture of Sharia-compliant property financing before and during the COVID-19 outbreak. In general, the findings show that the macroeconomic variable reflected by regional inflation has had a different influence in the two periods, with Islamic banks having had much more exposure to macroeconomic risk, specifically in home financing, during the epidemic. In addition, the different influences are also shown by the study results, which show that provinces on Java Island face less risk exposure than those outside Java. In terms of impulse response factors and variance decompositions’ result, before the outbreak, the response of home financing risk to inflation tended to be more stable. However, during the outbreak, the movement has tended to fluctuate more, especially outside Java Island. The same result for variance decompositions shows a similar trend, with inflation tending to have a larger impact during the outbreak. AcknowledgmentsWe are grateful to the Direktorat Penelitian dan Pengabdian Masyarakat (DPPM) Universitas Islam Indonesia No. 001/Dir/DPPM/70/Pen.Unggulan/XII/2020 for support and providing a research grant for the study.

Exploring the Prospects for Islamic Home Finance in the UK: Evidence from the Industry Practitioners’ Perspective

The predominant focus of most of the existing literature assessing the potential of Islamic home finance in the UK has been on Muslim customersand also appears to be outdated. This updated study takes a fresh approach, exploring the prospects for Islamic home finance taking into account the UK’s current financial position by involving neglected key stakeholders: independent mortgage consultants. The findings—derived from semi-structured interviews with a sample of ten experienced mortgage brokers—reveal that factors such as affordability (i.e. higher deposits), acceptability (i.e. strict criteria), accessibility (i.e. lack of products and banks),and low levels of product knowledge and recognition have restricted its uptake. The findings also highlight that the Muslim community does not provide a sufficiently large market for Islamic home finance and,as such,it has a limited scope in the UK market.

The ‘Greater Hungary’ and the EURO 2020. Sports diplomacy of an illiberal state

ABSTRACT Sports Mega-Events have been part of the modernization of the West and its Macro-Social Changes since the mid-19th century. These are part of both the initial proposal dedicated to strengthening a national identity based on ethnocentrism, monoculturalism and xenophobia and the one from the 70s, centered on cosmopolitanism, human rights and individualism. Therefore, the question must be raised as of the effects of holding a sports event such as the Euro Cup in countries with a policy defying UEFA and European Union values, as in the case of modern Hungary, a sensitive case because of the controversial Home Financing Law; in addition, the public sports diplomacy enhances anirredentist vision of the “Great Hungary'', which is troublesome in the current European Union framework. This work pretends to research and clarify the Hungarian association structure in order to put into perspective the suitability to develop SME in countries proclaiming illiberal values.

Praktik Akad Istishna' Paralel dalam Jual Beli Rumah di PT. Berkah Rangga Sakti Kecamatan

Today the need for a place to live is a factor in the community to meet their daily needs, even though they do not have enough money, people are competing to own a house, so that many people get a place to live by paying in installments with various systems in their respective places of residence. Application of a parallel istishna 'contract in buying and selling houses in a company PT. Berkah Rangga Sakti, which is engaged in selling houses, has met the requirements and principles that apply in the shari'ah economy. But in the financing of PT. Berkah Rangga Sakti did not use a Syari'ah Bank but a conventional bank due to the difficulty of accessing the Syari'ah Bank, which provides home financing in the Bangkalan area.

Praktik Akad Istishna' Paralel dalam Jual Beli Rumah di PT. Berkah Rangga Sakti Kecamatan

Today the need for a place to live is a factor in the community to meet their daily needs, even though they do not have enough money, people are competing to own a house, so that many people get a place to live by paying in installments with various systems in their respective places of residence. Application of a parallel istishna 'contract in buying and selling houses in a company PT. Berkah Rangga Sakti, which is engaged in selling houses, has met the requirements and principles that apply in the shari'ah economy. But in the financing of PT. Berkah Rangga Sakti did not use a Syari'ah Bank but a conventional bank due to the difficulty of accessing the Syari'ah Bank, which provides home financing in the Bangkalan area.

Critical analysis of beneficial ownership in mushārakah based home financing in Malaysia

PurposeThis paper critically aims to examine the concept of beneficial ownership and its application in musharakah-based home financing.Design/methodology/approachThe study applies the method of juristic interpretation in analyzing the meaning of beneficial ownership in legal documentation of musharakah-based home financing. This qualitative study uses content analysis approach that investigates the works of Islamic scholars on the concept of ownership and evaluates the concept of beneficial ownership in musharakah-based home financing from the Islamic perspective.FindingsThe result finds that beneficial ownership is considered a true ownership, as Shari’ah allows the transfer of ownership based on the offer and acceptance in a contract. Furthermore, the absence of legal registration does not mean the absence of true ownership, whereas all documentations and agreements have clearly stated rights and liabilities of each contracting parties.Originality/valueThis paper provides a fiqhi discussion of analyzing beneficial ownership in musharakah-based home financing. It shows that Shari’ah parameters are essential for the use of beneficial ownership to ensure its compliance with the Shari’ah requirements of milkiyyah (ownership).

Concept & Application of Baiʻ al-Īnah in Islamic Banking in Indonesia and Malaysia

Baiʻ al-īnah is the process of buying and selling carried out by the seller to the buyer on a direct or credit basis, which then the goods are resold by the buyer to the original seller at a price lower than the previous purchasing price. This research is normative (doctrinal) research, with a regulative (statute approach) and conceptual approaches, emphasizing the use of secondary data in the form of primary, secondary, and tertiary legal materials. The result shows that: First, the scholars had different opinions on baiʻ al-īnah. Abu Hanifah forbade baiʻ al-īnah from the legally binding sale, and the purchase was illegal. Hence the second sale and purchase were also illegal. Besides, Imam Malik and Ahmad ibn Hanbal also prohibited baiʻ al-īnah because they both adhered to the arguments of sadd aż-żrīʻah, where baiʻ al-īnah contained elements of usury, manipulation to justify baiʻ al-īnah interest. In contrast, Imam al-Syafi'i allowed baiʻ al-īnah because buying and selling were halal (legal), and based on qiyas, the buying and selling model was in line with the law of buying and selling according to the Al-Qur'an. However, al-Syafi'i also prohibited baiʻ al-īnah if any hilah/manipulations occur. Second, Indonesia prohibits baiʻ al-īnah to be applied in Islamic Financial Institutions (LKS), except for one type of baiʻ al-īnah in an emergency case, the for transferring customer debts from Conventional Financial Institutions (LKK) to LKS. Meanwhile, in Malaysia, baiʻ al-īnah can be applied to Islamic financial institutions because Malaysia refers to the opinion of Imam al-Syafi'i. Despite that, Malaysia continuously evaluates the program and regulates baiʻ al-īnah to be applied cautiously. Baiʻ al-īnah in Malaysia is practiced in several Islamic products, including Islamic credit card financing, home financing, gold transactions,etc.

Analisis Penerapan Etika Bisnis Islam Dalam Mekanisme Pengajuan Produk Pembiayaan Griya Rumah Baru Di Bank Syariah Mandiri Kantor Area Thamrin – Jakarta Pusat

ABSTRACT
 Researchers see some people still do not understand about the mechanism in applying home financing products in sharia banks. This research aims to provide information about the process of applying for sharia-based housing financing, but also wants to know whether the process has implemented Islamic Business Ethics and the foundation of law and sharia. Islamic Business ethics theory refers to the instrument or regulation of three principles of regulation of the Financial Services Authority No. 4/POJK. 05/2018. About secondary housing Financing Company Article 8 paragraph (3) namely the principle of justice (' ADL), balance (Tawazun), Benefits (Maslahah), and Universalism (Alamiyah), does not contain things forbidden, such as Riba, Maisir, Gharar, Zalim, Risywah, Maksiat, Haram object, and carried out by using AKAD in accordance with the fatwa of the National Sharia Council of Ulama Indonesia (DSN MUI). The collection of research data is done by observation methods, interviews, and documentation. Analysis is done with a qualitative descriptive approach, using source triangulation

Inefficient Regulation: Mortgages versus Total Credit

We study the impact of loan-to-value regulation on supply and demand for unregulated debt that is used for home acquisition. In our setting, part of the dwelling price is in the form of pre-existing debt exempt from the regulation. Variations in the latter prior to the LTV regulation generated exogenous variation in the regulatory requirements across buildings. We find that households, especially constrained ones, start paying more for dwellings financed with more unregulated debt. Our estimates reveal a willingness to pay for alternative home financing of about 250 percent above the prevailing mortgage rate. In the longer run, the supply of unregulated debt increases by almost 50 percent. We corroborate our findings by aggregating evidence from 13 countries.

Risk Management of Musyarakah Mutanaqisah Contract in Sharia Banks in Indonesia: Legal and Operational Issues

This paper discusses how to solve problems occurring in the risk management of musyarakah mutanaqisah contract on home financing in sharia banks in Indonesia, particularly on its legal and operational issues. This study used a qualitative method using library data collection techniques and interviews. The study found that legal and operational risk management issues could be satisfactorily resolved by agreement of rescheduling, adding new conditions, and using new structures in accordance with Islamic teachings and applicable positive laws. In addition, ownership proof of some is needed to minimize the risk for the bank and the customer.

EXPLAINING THE EFFECTS OF SHARIAH COMPLIANCE, FINANCIAL FREEDOM AND RELIGIOSITY ON ISLAMIC HOME FINANCING ACCEPTANCE IN KOTA KINABALU, SABAH

At present, home finance exists because the most important in someone's life is to have shelter meanwhile the house is the place to dwell in comfort with their family. Someone can have their own home by buying a house whether using cash or monthly installment. As for Islamic finance institutions, they have introduced the Shariah-compliant to have their own house the same goes to a conventional loan. However, a conventional loan may serve the interest that prohibited in Islam where there are known as Riba. Home financing gives impact to people where home financing takes a large chunk from their income. This study intends to examine the impacts of Shariah compliance, financial freedom, and religiosity on Islamic home financing acceptance. A total of 150 respondents are collected to meet the research objective. Likewise, SPSS software is used to analyze the research findings. The results obtained suggest that Shariah compliance, financial freedom, and religiosity are instrumental in determining Islamic home financing acceptance. Limitations and future research are provided.

Seller Financing: Contracting Out of the Lemons and Moral Hazard Problems When They May Co-Exist

Quality problems that are known to the seller of an asset, but will become known to the buyer only after the purchase have the potential to frustrate voluntary exchanges. When the problem is subtle or confounded by the extent of buyer inputs, requiring risk-sharing by the contracting parties, both parties would benefit from a mechanism, such as seller financing, which not only credibly signals to the buyer the veracity of the seller’s representations about the asset (s)he is trying to sell, but also offers the seller sufficient protections against the potential that the buyer may engage in post-sale opportunistic behavior about the maintenance of the asset. We analyze one-time-only mortgage contracts in the National Association of Realtors' Home Financing Transaction database for 1984-1996, (data not collected outside this period), and find empirical support for seller financing as an asset quality signal and, separably, as a mechanism for providing credit when conventional credit sources are tight. We also point out the broad, but not well-acknowledged, reach of seller financing, including the sub-prime loan debacle, the earnout mergers or reverse annuity mortgages, which are inherently embedded with both asymmetric information about the quality of the relevant assets and moral hazard about the asset acquirer’s post-purchase maintenance.

Bai Bithaman Ajil (BBA) and Musharakah Mutanaqisah (MM): Comparative Analysis

A comparative analysis between Bai Bithaman Ajil (BBA) and Musharakah Mutanaqisah (MM) for the home buyers preference in choosing Islamic home financing. There are three main variables that are being used to identify most influenced factor which are Shariah compliant, pricing, and equality. All variables have a significant value towards preference on Islamic home financing, it meet the purpose of the Shariah (Maqasid al Shariah). MM home financing mode is more preferable based on Mean value as Shariah compliant and Equality shows a higher value compared to BBA. These results may help Islamic banking in Malaysia in order to expand the market to compete with conventional bank.

Management of fatwa standardisation on the practice of bay’ ‘inah contract in Malaysia: an analysis according to usul al-Fiqh and mura’aht al-Khilaf method

PurposeThis study aims to investigate the practice of bay’ ‘inah contract in personal and home financing products by some Islamic Finance Institutions (IFIs) and examine the differences in the selection of contracts in banking products amongst IFIs mainly involving personal financing. The study will also propose a solution to the problem of differences and simultaneously standardise personal financing contracts in Malaysia.Design/methodology/approachThe methodology of this study is qualitative, in which the data are collected through library research and field studies. The library research is done by examining books of usul al-fiqh (principles of Islamic jurisprudence), mura’aht al-khilaf, maqasid shariah (objectives of Islamic law) articles, statutes and related circulars, while field studies are conducted in an unstructured interview method with some members of Shariah Advisory Council (SAC) and academicians from Bank Negara Malaysia (BNM), IFIs and public university.FindingsThe findings show that there is a difference in views amongst SAC members in IFIs on bay’ ‘inah contract that effects the differences in the execution of such contract in banking applications. The study found that the bay’ ‘inah contract was non Shariah (Islamic law) compliant based on Shariah’s arguments and the opinion of the majority of past and present Islamic scholars. The study found that the BNM’s SAC did not allow the bay’ ‘inah contract to be practiced in personal and home financing products. Hence, this study proposes standardisation steps based on differences in the problems studied. The study also suggested that the SAC of BNM make improvements and updates on its solution regarding the bay’ ‘inah contract so that it is not misunderstood especially amongst IFIs.Research limitations/implicationsThe study is only looking at one case study, which is the bay’ ‘inah contract practiced by the IFIs in Malaysia.Practical implicationsThis study proposes the standardisation of personal financing products practiced by the IFIs. The results of this study can reduce Sharīʿah non-compliance products in the market. The results of this study have gained a deep understanding of the solution of bay’ ‘inah contract made by the SAC of BNM. The findings also reduce the conflict between Shariah scholars locally and internationally and can restore the image of Islamic banking in Malaysia from engaging with controversy products or contracts.Social implicationsThe confidence of the public in Islamic banking is increasing as there is no contractual engagement with serious controversial issues and contracts similar to the concept of riba and hilah (trick) that is prohibited by Islamic law in IFIs.Originality/valueThis study analyses the differences of fatwa (a ruling on the point of Islamic law) about bay’ ‘inah contract decided by some SACs of IFI based on the discipline of usul al-fiqh. The study found that the bay’ ‘inah contract is not allowed by Islamic law. The study has proposed the standardisation of the fatwa differences based on the concept of mura’aht al-khilaf and the concept of standardisation in Islamic finance and to standardise personal financing products amongst IFIs in Malaysia.

Dynamics of selecting Islamic home financing

AbstractIslamic financing products are modes of finance based on principles of profit and loss sharing, no interest and no remunerative betting or speculation. Islamic home financing is one such mode of financing which is based on ownership sharing or deferred payment arrangement with the bank, hence avoiding chances of interest and speculation. This study examines the factors that affect customers' decision in selecting Islamic home financing services. A quantitative research methodology was adopted to study the dynamics of Islamic home financing by determining the level of key factors in Pakistani consumer market. Using stratified random sampling technique, data was collected from 250 bank customers through five‐point Likert scale questionnaires. Various tests were applied to check the reliability, sampling adequacy and correlation. Multiple regression analysis was applied for hypothesis testing. The findings of the study reveal that the level of knowledge, media advertisement, bank reputation, product choices and Shariah compliance are the key factors for the Pakistani bank customers who selected Islamic home financing. More importantly, we find no significant impact of price and bank services on selection of Islamic home financing. The results of the study enable the Islamic banking professionals and managers to identify the factors that are most valuable to customers for the selection of Islamic home financing over conventional home financing modes. They are suggested to develop strategies and plans to educate people more about Islamic home finance and develop their product portfolio to provide people with more Shariah compliant choices. This study contributes to the Islamic banking literature by extending and identifying the factors of Islamic home financing.

As Parcerias Público-Privadas no âmbito dos programas de habitação social

Resumo Diante do déficit habitacional, a gestão pública de diversos países procura atender a demanda por moradia a partir de parcerias com a iniciativa privada. Neste contexto, o artigo tem como objetivo compreender e comparar a aplicabilidade das Parcerias Público-Privadas (PPPs) no Brasil e Estados Unidos, através de estudos de caso do Programa Parceria Público-Privada Habitacional em São Paulo e do Section 8 Housing Choice Voucher Program em Nova York. Utiliza-se o Método Arquitetura Dialógica, que relaciona o objeto de estudo com seu contexto. Para a análise comparativa de ambos os programas foram utilizados os seguintes parâmetros: a) legislação e normativa; b) agentes envolvidos; c) beneficiários; d) financiamento ou auxílio para locação da unidade de habitação; e) localização dos empreendimentos ou da oferta das unidades; f) tipologias de habitação. Os resultados mostram que ambos os programas apresentam potencialidades e restrições quanto ao emprego das PPPs para a oferta de habitação à população de baixa renda. A pesquisa contribui com os estudos sobre habitação social através das PPPs.

Recent developments concerning arbitrability of IPR disputes in India: a need for reform

ABSTRACT Arbitrability in the context of IPR disputes has gained popularity worldwide. In India, there is no statutory provision that mandates the adoption of ADR when it comes to IPR disputes. The lack of any legislative insight thus stands as an impediment to efficient dispute resolution. The judiciary has also not taken a consistent stand in this regard. As a result, the law on this issue is a scattered version of what it could be. To improve the business environment and IPR protection, it is important to reform the law, keeping in mind the developments that are taking place in jurisdictions across the world. This paper studies the jurisprudence that has developed in India. It analyses the principles laid down by the Supreme Court of India in Booz Allen and Hamilton v SBI Home Finance, its inconsistent application by High Courts, and concludes that there exists scope for codification and uniformity.

Financing homes by employing Ijara based diminishing Musharaka

Purpose This paper aims to examine how homes can be purchased and financed by using Ijara-based diminishing Musharaka (IDM) modes of financing and thus both the home buyer (HB) and Islamic Bank (IB) become joint owners and share rental income jointly according to their respective shares. Such practice can help to avoid interest-based mortgage financing and eliminates excessive risks of bankruptcy as it often happens in conventional interest-based system. Design/methodology/approach A mathematical model as well as rental income, payments and share schedules for IDM will be developed where both the HB and IB will initially own the home. As the HB gradually pays off the principal amount, his or her share will increase while the share of the IB will gradually decrease as stipulated in the contract. Eventually, the HB will buy back all the shares and thus will own the home without paying for mortgage interest and taking excessive risks of foreclosures or living in constant fear of losing home over approximately 20 to 30 years of the tenure of the mortgage payments. Findings The HB can own home without paying any interest and without taking excessive risks of foreclosures. The HB is not borrower rather partners in business. In addition, the HB can minimize the total payments compared to interest-based mortgage financing. In the current IDM model, payments are flexible, and the HB will not be required to make regular installment payments, rather he or she receives regular rental income if the HB chooses not to live in the home. Even if HB lives in the home, part of the home can be rented, and the HB will receive regular share of rental income in each month. The HB will not lose the home even if he does not pay any installment while in interest-based mortgage system, the HB may lose the home if the HB stops installment payments even for a couple of months after paying for 29 years for 30 years mortgage. IDM mode of financing is risk free and worry free, and it instantaneously creates rental income for the HB, like any other business. Originality/value The current IDM model is one of the most recent, and unique approach of home financing, and it is extremely flexible and free from many restrictions compared to the existing similar models. Many of the existing diminishing Musharaka models impose many restrictions on the HB, such as the HB cannot even own or rent the place, cannot remodel or rebuild the place unless the HB pays off all the outstanding price of the home. If the current flexible IDM model is implemented, it will be truly revolutionary and even the people from other faith group will be extremely interested to join as HB and buy their homes by pursuing IDM mode of financing because it is risk free as well as it will free HB from the financial slavery of monthly installment payments for about two to three decades, especially during the most important and most valuable prime life time of the HB. The IDM model will unveil a potential and a promise to financial freedom by removing all constraints and preconditions in purchasing and financing homes.

Receptiveness of Islamic Home Financing among Malaysians: A Revisit

This study examines the effects of the key factors influencing the intention of first-time house buyers to choose Islamic home financing products. First-time house buyers are selected since they are the major segment of Islamic banks' profit for the Islamic mortgage sector. Drawing upon the theory of planned behaviour (TPB), this study proposes a model to test the effects of attitude, subjective norm and perceived behavioural control on the intention of selecting Islamic home financing. This study also examines the effect of "perceived customer taqwa” on customer receptiveness to Islamic home financing. Based on 150 usable questionnaires, PLS results indicate that attitude and perceived behavioural control of the TPB are instrumental in determining the receptiveness of Islamic home financing products. Besides, the added factor, namely, perceived customer taqwa is influential in explaining the receptiveness- implying that God-fearing and God-conscious in oneself resulted in strong intention to opt for halal products. The findings demonstrate that the enhancement of measurement items for TPB factors as well as generation of new factor reflecting Islamic home financing are relevant in determining one’s decision of Islamic home financing. Besides, the findings could offer support to Islamic bank managers to enhance their planning for Islamic home financing products and develop effective strategies accordingly that benefit their customers.

ANALISIS TEKNIK MITIGASI RISIKO PRODUK TAKE OVER KPR PADA BANK PANIN DUBAI SYARIAH CABANG SURABAYA

This research aims to determine the risk mitigation technique for home financing takeover-funded products. The method used for this research is descriptive qualitative-case study. The data gained from this research is a primary data from an interview with three sources from Panin Dubai Sharia bank, and a secondary data of documentation and financial report of Panin Dubai Sharia Bank. The result of this research is Panin Dubai Sharia bank used reduction mitigation technique either on credit risk or operational risk. On the operational risk, Panin Dubai Sharia bank prepared document takeover and properties takeover further before the contract is done, and implementing Take over Operational Day only on Monday and Thursday. Meanwhile, for credit risk, Panin Dubai Sharia Bank used 4 kinds of systems such as backup of credentials, guarantees, internal ratings, computer models.Keywords: Mitigation, Risk, Take Over, KPR