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Theoretical Impact Of Enhanced Musharakah Mutanaqisah Home Financing On Real Estate Prices

Author

Listed:
  • Alam I. Asadov

    (Prince Sultan University)

  • Mansor H. Ibrahim

    (International Centre for Education in Islamic Finance (INCEIF))

Abstract

This paper theoretically analyzes two alternative modes of home financing. The first mode is the conventional housing loan and the other is Enhanced Musharakah Mutanaqisah (EMM) home financing. Our results reveal the EMM based setting is superior to the conventional housing loans in at least two aspects. These are the prevention of house price inflation in all phases of economic business cycle and the smoothening of real estate cycles. This means that, under the EMM, the risk of real estate bubble formation is subdued, which should prove to be welfare improving.

Suggested Citation

  • Alam I. Asadov & Mansor H. Ibrahim, 2018. "Theoretical Impact Of Enhanced Musharakah Mutanaqisah Home Financing On Real Estate Prices," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(1), pages 133-160, August.
    • Handle: RePEc:idn:jimfjn:v:4:y:2018:i:1h:p:133-160
    DOI: https://doi.org/10.21098/jimf.v4i1.747
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    References listed on IDEAS

    as
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    2. Edib Smolo & M. Kabir Hassan, 2011. "The potentials ofmushārakah mutanāqisahfor Islamic housing finance," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 4(3), pages 237-258, August.
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    More about this item

    Keywords

    Musharakah Mutanaqisah; Islamic home financing; RE cycles; RE bubble;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • P40 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - General

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