Aggravating housing situation: Return and ownership issues in Islamic home financing revisited

In my latest article on Islamic home financing models in the ISRA Journal, June 2013,I had shown that the Zubair Diminishing Balance Model (ZDBM) does not involve compounding of return and the transfer of ownership to the customer perfectly matches the payments’ rate; the two norms Islamic models must meet. It is satisfying to note that Nabil in the same issue of the journal takes up these issues in a comprehensive and tightly argued conceptual paper and convincinglyvindicates my position on the compounding issue. However, he argues that the transfer of ownership in the ZDBM also does not meet the stated ideal even as it is closer to the norm than other constructs. The objective of this paper is to clarify my position on this latter issue albeit I shall put on record a more clinging demonstration of interest compounding in the conventional formula as many Islamic banks use it not only in home financing but in other deferred payment contracts as well.