<![CDATA[Musyarakah mutanaqisah-based home ownership financing (KPR) has become increasingly popular, although this contract was initially developed for productive activities. This study aims to examine the suitability of musyarakah mutanaqisah for home financing under Sharia principles and applicable positive law, analyze its implementation in Islamic banking, and identify problems arising in practice. Using normative legal analysis with conceptual and practical approaches, this study examines the legitimacy and implementation of musyarakah mutanaqisah based on Bank Indonesia regulations and relevant DSN-MUI fatwas. The findings indicate that the existing regulatory framework provides legal legitimacy for applying musyarakah mutanaqisah to home financing. Although originally associated with productive activities, musyarakah mutanaqisah may also be applied to consumptive financing, provided that its pillars, conditions, and Sharia principles are fulfilled. In practice, home financing through musyarakah mutanaqisah employs a modified parallel contract model adapted to the characteristics of residential financing. Nevertheless, its implementation presents several legal and practical challenges, particularly regarding costs imposed on customers, taxation, and collateral arrangements. The study concludes that musyarakah mutanaqisah is legally and Sharia-compliant for home financing when implemented according to applicable regulatory requirements and contractual principles. Academically, this study contributes to the discussion of contemporary Islamic banking by clarifying the transformation of musyarakah mutanaqisah from a predominantly productive financing instrument into a Sharia-compliant mechanism for residential ownership. It also highlights the need for regulatory and contractual improvements to address cost, tax, and collateral issues and strengthen legal certainty and fairness for customers.]]>
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