Beyond Banking: Innovating Sharia-Compliant Housing Finance for Sustainable Homeownership

Abstract

Access to affordable and Sharia-compliant housing finance remains a major challenge for many Muslim households, particularly those excluded from formal banking services. While Islamic banking has expanded significantly, existing financing schemes often remain inaccessible to unbanked consumers and may not fully address concerns regarding affordability, flexibility, and compliance with Islamic legal principles. This study explores an innovative non-bank Sharia-compliant housing finance model as an alternative pathway toward sustainable homeownership. Using a qualitative descriptive approach, data were collected through in-depth interviews, field observations, and document analysis across four non-bank Islamic housing projects involving developers, administrative personnel, and homeowners. The findings reveal that the financing model operates through direct murabahah and istisna' contracts without bank intermediation, interest, late-payment penalties, property repossession, or conventional credit screening. Beyond improving financial accessibility, the model promotes ethical financing by integrating transparency, mutual consent, flexible restructuring, and character-based risk assessment to mitigate default while preserving social trust. However, deferred property title transfers remain a significant legal challenge requiring stronger regulatory safeguards. This study contributes to the Islamic finance literature by proposing a sustainable non-bank housing finance framework that integrates Sharia compliance, financial inclusion, and risk governance. The findings offer practical insights for policymakers, regulators, and Islamic property developers seeking to strengthen alternative housing finance ecosystems that support inclusive and sustainable homeownership.