Permissibility to purchase a home on the basis of home mortgage/interest bearing loans
I would like to ask that I was planning to have a loan for home. I knew it is not permissible as all the Indian banks have the system of Riba. Will you please suggest me how can I get the amount to purchase a home?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh
We commend your enthusiasm in searching for Shariah Compliant Solutions to fund your asset purchase. Adherence to Shariah invokes the Mercy and Rahmat of Allah (Subhanahu Wa Ta’ala). May Allah grant you Barakah. Aameen.
You state that you wish to purchase home. It is impermissible for one to purchase a home on the basis of home mortgage/interest bearing loans. You also state that Indian banks do not offer Shariah Compliant home financing.
We advise you to consider the following alternatives:
1. You may adopt Shariah Compliant Home Finance Solutions via private funding. You may use the following common Shariah Solutions:
1.1 “Ijara Wa Iqtina” (Rent to Buy) facility where a prospective client may lease a house over a period of time and thereafter receive an option to purchase the car once of for a minimal sum of money.
1.2. Murabaha “Cost plus Financing” facility where the client purchases equity from a third party while receiving the necessary finance from the Islamic Bank. This facility entails a complex structure of seven different stages such as purchase requisition, MMFA “Master Murabaha Facility Agreement”, Agency (Specific/Global) Agreement, etc.
1.3. Bay al-Ta’jeel “Sale on deferred payment” facility where the bank sells the equity to the client on the basis of periodic instalments for a fixed tenure.
1.4. Diminishing Musharakah where the bank and the client jointly purchase the equity. The bank charges rent to the client for the equity it owns while the client gradually purchases the bank’s equity over a fixed period of time.
You are welcome to contact us should you require assistance with documentation.
2. You may contact your local banks and explain the importance of Shariah Compliancy in funding your home purchase. Explain to them the financial benefits in offering a Shariah Solution to the Muslim Public. It may be wise for you to contact certain influential individuals and professionals in your community, explain your position to them and request their advises on how best to approach the financial institutions. You may also obtain a petition from your local community which you can present to the bank to show the great demand for Shariah Banking. They do not require to change any of their financial risk lending/due diligence procedures in offering such a solution. Furthermore the risk profile of the bank in any transaction will be protected and not violated. You are welcome to contact us in facilitating correspondence with interested parties to devise and create Shariah Compliant Financial Solutions.
And Allah Ta’āla Knows Best
Checked and Approved,
Mufti Ebrahim Desai.