Bolton Business Finance arranges Sharia compliant development finance for UK property developers, from buying the site through to selling or refinancing the finished units.
Islamic development finance funds ground-up builds, conversions and heavy refurbishments without interest. The lenders we use earn a profit agreed at the outset instead, with facilities from £100,000 to £5 million and up to 85% of project costs funded. We are a Bolton based broker with a panel of 135+ lenders that includes the specialist Sharia compliant lenders active in UK development.
Written by Marcus Wright, owner and founder of Bolton Business Finance Ltd, in financial services since 2008 and a commercial finance broker since 2019. Last reviewed November 2026.
On this page
The short version
- Islamic development finance is short-term property funding for land and build costs that charges no interest.
- Lenders earn a profit fixed at the outset, most often through a commodity Murabaha, which is a deferred sale of metal at an agreed mark-up.
- As at November 2026, facilities run from £100,000 to £5 million, at up to 85% of costs and 65% to 75% of gross development value (GDV).
- Build terms run up to 24 months, and Sharia compliant development exit finance is available once the scheme is finished.
- Most lenders want a limited company or SPV. One also lends to individuals investing for business purposes and to expats in 13 named countries plus the EEA.
- HMRC treats the profit as interest for corporation tax, so a developer company gets the same tax relief as on a conventional loan.
| Item | Detail |
|---|---|
| Facility size | £100,000 to £5 million |
| Funding limits | Up to 85% of total costs, capped at 65% to 75% of GDV depending on the lender |
| Build term | Up to 24 months |
| Profit rate | From 1% a month, or from 12% a year on larger corporate schemes |
| Arrangement fee | From 2% of the facility |
| Development exit | Up to 70% of value, £100,000 to £3 million, from 0.94% a month |
| Borrowers | Limited companies, LLPs and SPVs. One lender also accepts individuals and expats investing for business purposes |
| Locations | England and Wales for build finance. Development exit also covers Scotland |
| Structure | Commodity Murabaha on most build facilities |
| Our fee | £495 upfront plus 1% on completion |
What Islamic development finance is
Islamic development finance is short-term funding for a building project structured to avoid riba, the interest Islamic law prohibits. It does the same job as a conventional development loan: covering the site purchase, staged payments to the contractor, and carrying the scheme until the units are sold or let.
Where it differs is in the contract. A conventional lender charges interest on the balance drawn. A Sharia compliant lender earns its return from a trade, with the amount agreed before any money moves. Funding is also screened, so these lenders will not back schemes linked to sectors such as alcohol, tobacco, gambling or arms.
Development finance for homes built to sell or let sits outside FCA regulation, and that is the only kind we arrange. We cannot help with a self-build where you or your family plan to live in the finished property.
How the profit is worked out
Two of the three Sharia compliant development lenders on our panel use a commodity Murabaha. It works in four steps.
- The lender buys a commodity. It buys a Sharia compliant commodity, usually a metal, at the market price for the amount you need.
- It sells the commodity to your company at a mark-up. The mark-up is agreed up front and is payable at the end of the term or in instalments.
- Your company sells the commodity back to the market. It sells at the price the lender paid and receives the cash. The lender handles every trade for you.
- You use the cash for the scheme. The money buys the site and pays for the build, and the lender takes a first charge over the property as security.
There is no price risk on the metal for either party, as the purchase and sale are completed one after the other without delay. The mark-up is your cost of finance. It is fixed when the trade is made, so it does not move with the Bank of England base rate.
A plain Murabaha, where the lender buys the property itself and sells it on to you, only works for a purchase. The commodity version can also refinance a site you already own, which is why it has become the usual route for UK bridging and development. Build money released in stages is usually documented as further trades as each tranche is drawn, with the offer letter setting out exactly how that will work.
The third lender, which focuses on development exit and finish to exit, does not publish its contract structure. It prices on a monthly rate, you only pay for the time the funds are out, and it charges no early redemption fees.
Funding by project stage
Islamic finance can now cover every stage of a residential scheme. That was not the case a few years ago. These are the products we can place, based on lender guides current at November 2026.
- Site purchase and build. Facilities from £200,000 to £5 million for limited companies, at up to 85% of costs and 65% of GDV, over terms of up to 24 months. Profit from 12% a year with an arrangement fee from 2%. A quantity surveyor monitors the build at your cost.
- Heavy refurbishment and conversion. From £100,000 to £5 million at up to 75% funding to value, for 1 to 24 months, at 1% a month with a 2% arrangement fee. Individuals, companies and expats can apply. This suits office to residential schemes and HMO conversions.
- Finish to exit. Where the shell is built but the scheme needs completing, up to 70% of value and £3 million, from 0.99% a month at 60% funding to value, with the remaining works agreed with the underwriter.
- Development exit. Once the scheme reaches practical completion, up to 70% of value from 0.94% a month at 60%, rising to 1.04% at 70%. This clears the build lender and gives you up to 12 months, or 18 months by agreement, to sell.
- Refinance onto Islamic buy to let. Units you keep can move onto a Sharia compliant buy to let at up to 80% funding to value. See our Islamic buy to let mortgage page.
If you need to buy a property quickly before the project starts, our Islamic bridging finance page covers short-term purchase funding. For conversions specifically, see our commercial to residential conversion guide.
Who qualifies
Lenders look at the scheme first, then the borrower. The appraisal has to stack up on realistic build costs and sale values, and the exit needs to be clear before the facility is offered.
What Sharia compliant development lenders look for
- A limited company, LLP or SPV. The corporate build platform on our panel lends to companies only.
- Personal guarantees from the directors. One lender needs a guarantee from every director, up to four.
- A track record, or a strong professional team. Some lenders accept limited experience with an assets and liabilities statement.
- Planning consent in place for the scheme you are funding.
- At least one director based in the UK on some products. Expats in 13 named countries plus the EEA can apply to one lender.
- A credit file that does not threaten the exit. Some products accept past credit issues with a clear explanation.
Build finance is available in England and Wales. Development exit and finish to exit finance also covers Scotland.
What it costs, with a worked example
Islamic development finance is priced in the same range as conventional specialist development lending. You pay a profit rate instead of interest, an arrangement fee, and the lender’s valuation, quantity surveyor and legal costs. Our own fee on property-secured deals is £495 upfront plus 1% on completion.
Worked example, illustrative only
A developer company buys a site for £300,000 with a build budget of £500,000, giving total costs of £800,000. The finished scheme of four houses has a GDV of £1,200,000.
| Step | Figure |
|---|---|
| 85% of total costs | £680,000 |
| 65% of GDV | £780,000 |
| Facility, the lower of the two | £680,000 |
| Developer contribution | £120,000 plus fees and contingency |
| Arrangement fee at 2% | £13,600 |
| Profit at 12% a year if fully drawn for 12 months | £81,600. Lower in practice, because build money is released in stages |
| Development exit at 60% of £1,200,000 | £720,000 at 0.94% a month, about £6,768 a month while the units sell |
Run your own figures through our development finance drawdown calculator and residual land value calculator before you approach a lender.
Islamic and conventional development finance compared
| Feature | Islamic development finance | Conventional development finance |
|---|---|---|
| How the lender is paid | A fixed profit from a commodity trade, or a monthly rate on some exit products | Interest on the balance drawn, often rolled up |
| Rate changes | Profit fixed when each trade is made | Fixed, or linked to a base rate |
| Choice of lenders | A small group of specialist lenders | A wide market, from banks to specialist funds |
| Investment screening | No funding for excluded sectors such as alcohol or gambling | No faith-based screening |
| Corporation tax | Profit treated as interest under the loan relationship rules | Interest relieved under the same rules |
| Who can use it | Any developer, of any faith | Any developer |
If you are open to both routes, our development finance page covers the wider market, and our development exit finance page explains the conventional exit options.
Tax and stamp duty
HMRC treats the return on a Sharia compliant facility as if it were interest. Part 6 of the Corporation Tax Act 2009 brings alternative finance arrangements within the loan relationship rules, so a developer company gets relief on the profit it pays in the same way as on interest. This is set out in the HMRC Corporate Finance Manual at CFM44040. Choosing Islamic finance does not leave you worse off on tax.
With a commodity Murabaha your company buys the site in its own name and the lender takes a charge, so there is a single stamp duty land tax charge on the purchase, as there would be with a conventional loan. Your accountant should confirm the position for your own scheme.
How the process works
- Initial call. You send us the appraisal, build costs, planning and your track record. We tell you which Sharia compliant lenders fit and roughly what they will fund.
- Indicative terms. We obtain terms from the lenders that suit the scheme and talk you through the differences.
- Credit committee. The lender underwrites the case and puts it to its credit committee.
- Valuation and cost review. A RICS Red Book valuation and a quantity surveyor’s review of the build budget.
- Legal work. Solicitors complete due diligence and the Sharia documents, including the commodity trade.
- Completion and drawdowns. Day one funds go towards the site, then build funds are released in stages as the surveyor signs off the work.
- Exit. You repay from sales, from development exit finance or by refinancing onto an Islamic buy to let mortgage.
Why use a broker
There are only a handful of Sharia compliant development lenders in the UK, and their criteria differ more than most. One only lends to companies on facilities over £200,000. Another lends from £100,000 and takes individuals and expats. A third only funds finished or nearly finished schemes. Approaching the wrong one first costs you time and valuation fees.
Bolton Business Finance is a member of the National Association of Commercial Finance Brokers with a panel of 135+ lenders. We already arrange Islamic bridging finance for property investors across the UK, and we can line up the exit before the build starts, whether that is a development exit facility or a Sharia compliant buy to let refinance.
Frequently asked questions
Is Islamic development finance halal?
The lenders we use structure their development facilities without interest, most often through a commodity Murabaha, where the return comes from an agreed mark-up on a trade. Each lender describes its products as Sharia compliant. Scholars differ on some structures, including commodity Murabaha, so if you follow a particular scholar or board, ask to see the lender’s Sharia certification before you commit.
How much can I borrow with Islamic development finance?
As at November 2026, Sharia compliant development facilities on our panel run from £100,000 to £5 million. Lenders fund up to 85% of total project costs, capped at 65% to 75% of the gross development value. Development exit finance on a finished scheme goes up to 70% of value and £3 million.
Can a first-time developer get Sharia compliant development finance?
Yes, in some cases. One lender on our panel accepts limited experience where the professional team is strong and you provide an assets and liabilities statement. A first scheme is easier to fund if it is small, has planning in place and uses an experienced contractor. Bringing in an experienced development partner also helps.
Can I refinance a finished development with Islamic finance?
Yes. Sharia compliant development exit finance can repay your build lender once the scheme reaches practical completion. It funds up to 70% of value, from 0.94% a month, for up to 12 months or 18 months by agreement, which gives you time to sell. Units you want to keep can move onto an Islamic buy to let at up to 80% funding to value.
Is Islamic development finance more expensive than a conventional loan?
Not by a wide margin. As at November 2026, profit rates start at 1% a month on development bridging, 0.94% a month on development exit and 12% a year on larger corporate build facilities, with arrangement fees from 2%. That sits within the range of conventional specialist development lending, and HMRC treats the profit as interest for corporation tax.
Do I have to be Muslim to use Islamic development finance?
No. Sharia compliant development finance is open to any developer, whatever their faith. Some developers choose it because the profit is fixed when each trade is made, or because the lender screens out sectors such as alcohol and gambling. The lending criteria, valuation and legal process are the same for every applicant.
Tell us about your scheme
Send us the site, the build budget and the GDV and we will come back to you, usually within 24 hours, with the realistic Sharia compliant options and what they are likely to cost.
About the author
Marcus Wright is the owner and founder of Bolton Business Finance Ltd. He has worked in financial services since 2008, beginning his career at Santander, and has been a commercial finance broker since March 2019.
He founded Bolton Business Finance in 2020 to give businesses access to the whole lending market rather than one bank’s own product range. The firm is a member of the National Association of Commercial Finance Brokers and works with a panel of 135+ lenders.
Marcus arranges commercial mortgages, bridging, development finance, business loans, asset finance, invoice finance and merchant cash advances. Call 0161 546 9128.
Bolton Business Finance Ltd is an independent commercial finance brokerage, not a lender. We are not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. All lending is for business purposes only. Registered address: Westgate House, 1 Westgate Avenue, Bolton, Greater Manchester, BL1 4RF. Company number 12495909.