In Arabic it is called Shirkat-ul-Mutanaqisa. Diminishing Musharaka is just a Musharaka with an additional feature of decreasing ownership of one party. This differs from normal Musharaka, Where ownership ratio does not change.

Basic Conditions

It can be either Shirkat-ul-Aqd or Shirkat-ul-Milk but there should be a real partnership.
Every partner should enjoy the benefits and bear the responsibilities.
Proper preparation and execution of transaction documentation.

The arrangement is composed of the following key activities

1. To create joint ownership in property.

2. Giving share of the FHM to client on profit.

3. Promise of client to purchase units/share of the FHM.

4. Purchase of the FHM's units.

5. Adjustment of profit according to share of the FHM in property.