Diminishing musharaka is a collaborative financing arrangement rooted in Islamic principles that offers an alternative to conventional home financing. First introduced in 1979, it gained formal acceptance in 2004 by the International Islamic Fiqh Academy (IIFA). In practice, this financial instrument entails a joint ownership arrangement between a financial institution and a client, wherein the client progressively acquires the property until ultimately achieving sole ownership. The distribution of profits and losses is determined by the respective ownership shares, with rental payments serving to cover both usage expenses and the acquisition of equity. In this scheme, sharia compliance is paramount, with scholars emphasizing adherence to principles such as equitable profit sharing and separate enforceability of contracts. Despite its theoretical acceptance, practical implementation faces complexities, including variations in regulatory requirements. Compared to conventional financing, diminishing musharaka offers advantages such as adherence to sharia principles, flexibility in rental adjustments, and better risk management. However, the practical implementation of this approach is not without its challenges, including lower profitability for financial institutions, legal adjustments, and complexities in implementation. Criticisms of existing practices highlight deviations from sharia principles, including application fees, compounding installment payments, and reliance on interest-based benchmarks. Concerns also extend to procedural challenges and the financial industry’s prioritization of profitability over sharia compliance.