The base contract
Ownership stays with the lessor for the life of the lease. The lessor bears the asset's risks (damage, obsolescence, total loss). The lessee pays rent for usufruct (the right to use). Rent is permissible because it is payment for a real benefit, not interest on money.
The asset itself must be permissible: a home, a vehicle, equipment. Leasing impermissible assets (a casino space, an alcohol distribution truck) is invalid regardless of structure.
Ijara wa Iqtina (lease-to-own)
In a halal home or auto financing context, the lease is paired with a binding promise that ownership transfers to the lessee at the end of the term, either via a separate sale at a token price or a gift contract. AAOIFI Sharia Standard 9 governs both pure Ijara and Ijara wa Iqtina.
The lease and the transfer must be two separate, sequential contracts. Bundling them into a single contract that calls itself a lease but functions as a disguised installment sale is a common error that Mufti review catches.
How rent is set
Rent can be fixed at signing or floating with a transparent benchmark. Mufti review verifies that any floating rent uses an Islamic benchmark or an objective measure (rental market data, for example), not a conventional interest index.
Where Ijara shows up
Halal home financing: Ijara CDC, LARIBA. Halal auto financing: most halal auto products in the US use Ijara or Murabaha. Equipment finance: Ijara is a clean structure for business equipment leasing.