How do you finance a house and land package with Islamic home finance?

Last updated 6 November 2026 · Reviewed by Riyadh Financial Services Compliance

How does a house and land package work?

With a house and land package, you buy a block of land and sign a building contract for a new home on it, often with a builder the developer works with. There are usually two contracts:

• The land contract: you buy the land from the developer or owner and pay for it at land settlement.
• The building contract: you sign a fixed-price contract with the builder, who is paid in stages as the home is built.

How stamp duty applies depends on your state or territory and how the contracts are set up. Ask your conveyancer or your state revenue office.

If the land is in a new estate, settlement may not happen until the title for your block is registered. If there's a long wait, ask your broker how long your approval lasts and what happens if your circumstances change in the meantime.

How does Islamic finance work for a house and land package?

Our Ijaar home finance uses Ijarah Muntahia Bittamleek, a lease that ends in ownership. You're the registered owner from settlement, and the financier holds a registered mortgage and a beneficial interest (an ownership share) in the property, which passes to you when all payments are made.

You pay a rental rate, because the financier earns rent on a real asset rather than interest (riba) on money lent. Our product structures are reviewed by our Shariah adviser, and our Shariah certificate is reviewed regularly. HomePay's rental deferral is covered by our current Shariah certificate. Ask us for a copy and what it covers. How Islamic home finance works explains the structure in more detail.

What is HomePay?

HomePay is an option on selected Ijaar home finance for house and land builds with HomePay-accredited builders on a fixed-price contract. It uses the same Ijarah contract as the rest of your Ijaar home finance. It isn't a separate or split contract.

• A rental deferral period from land settlement. For a limited period, starting at land settlement and running while your home is built, you don't make payments. Your broker will explain when your payments start. The deferred rental is calculated upfront and included in your total finance amount, so you pay more over the life of the finance.
• The deferred rental is calculated upfront. It's worked out before you sign and included in your total finance amount.
• You pay it back over the rest of the term. Because the deferred rental is part of the amount financed, you pay more over the life of the finance than if you'd made payments during the build.
• A variable rental rate. HomePay uses a variable rental rate.

This can help with cash flow, for example if you're still paying rent while you wait for your new home. Your broker can show you what the deferred rental adds to your total finance amount before you decide.

Who can use HomePay?

HomePay can be used when you buy a house and land package, and when you refinance to build. It's also open to temporary residents, and to Australians and New Zealanders living overseas, subject to the usual credit criteria. Read more about Islamic home finance for temporary residents and Islamic home finance for Australians and New Zealanders living overseas. Your broker will assess your situation.

How is your builder paid during the build?

The financier pays your builder in stages, called progress payments, as each stage of the build is completed and checked. Payments go directly to your builder, not to you. Our guide to construction drawdowns explains each stage, progress claims, inspections and the final payment.

How does HomePay compare with standard construction finance?

Construction finance is for fixed-price building contracts. Cost-plus contracts aren't covered. Your broker will explain which option suits your build.

What costs should you plan for?

• Your own contribution towards the land and the build.
• Purchase costs, such as stamp duty, legal or conveyancing fees and government registration fees.
• Fees for the finance, such as valuation, establishment and settlement fees, and a risk fee if it applies.
• Conventional building insurance for the property. You must keep the completed home insured.

We don't publish rental rates on this website. Ask an accredited broker for the current rates and to compare the total cost, including fees and, for HomePay, the deferred rental. See Is Islamic home finance more expensive?

Can first home buyers use a house and land package?

Yes. First home owner grants are set by each state and territory and are usually for new homes. If you're eligible, the grant can be applied for as part of your finance application on selected Ijaar home finance. Eligibility isn't guaranteed. Our first home buyers guide covers the other government help available.

What are the pros and cons of HomePay?

Possible pros:

• No payments during the rental deferral period, which can ease cash flow while you wait for your home. The deferred rental is included in your finance, so you pay more over its life.
• The same Ijarah contract throughout, rather than a split arrangement.
• The deferred rental is calculated upfront, so you know the total finance amount before you sign.
• Your builder is paid in stages, as each stage is completed and checked.

Possible cons:

• The deferred rental is included in your finance, so you pay more over the life of the finance.
• You need a HomePay-accredited builder on a fixed-price contract.
• Land settlement in a new estate can be delayed until the title is registered.
• Building delays or contract variations can add time and cost.

How do you apply, step by step?

1. Talk to an accredited broker. Share the package, the builder and whether you'll live in the home or rent it out.
2. Check the builder and the contract. For HomePay, the builder must be HomePay-accredited and the building contract fixed-price.
3. Gather your documents. Your broker will confirm the documents you need, including the land contract and the building contract.
4. Assessment. Your broker will assess your situation, and your application is assessed against credit criteria, including a valuation of the land and the planned home.
5. Approval and finance contracts. If your application is approved, you receive your finance contracts to read and sign. For HomePay, these show the rental deferral period and the total finance amount, including the deferred rental.
6. Land settlement and the build. The land settles, then your builder is paid in progress payments. See construction drawdowns.
7. Practical completion. The home is handed over. With HomePay, your broker will explain when your payments start.

How can Riyadh Financial Services help?

Riyadh Financial Services works with accredited mortgage brokers to offer Shariah-compliant home finance. For a house and land package, we can help with:

• HomePay: a rental deferral period, starting at land settlement, with a HomePay-accredited builder. The deferred rental is calculated upfront and included in your total finance amount, so you pay more over the life of the finance.
• Standard construction finance: for other fixed-price building contracts, with progress payments at each stage. See construction finance.
• Homes and investment properties: HomePay and standard construction are available for homes to live in and for investment properties.
• First home buyers: help applying for an eligible first home owner grant as part of your finance application, on selected Ijaar home finance.