Shari’ah Compliancy of property investment and relevant Zakat rules.

Regarding part 2 of my question in Fatwa#: 36437, following is the detail. All figures are examplary, but the shares are real.

We are four friends who wanted to invest. We talked to a real estate agent to find us options. He came up with a portion that is currently under construction. The builder agreed to sell it to us in 4 million.

 Each of us (4 friends) invested 1 million to buy that portion with the agreement that each of us will get 20% from the resale profit and the estate agent will take 20% of profit on the services that he provided to us in the following; buying the portion, seeing through all documentation and reselling once the construction is completed.

(Please note that this has not happened yet) Lets say the portion sells for 5 million. We get 1 million profit. Each of us, investors and the agent, will get 200,000 other than what we invested.

 

Please tell:

1. Is the above transactions Shariah Compliant?

2. If not, what should we do now?

3. Would I (one of the investors) need to pay zakat on this 1 million investment while keeping in view my previous query that I have done this investment to go for a larger flat due to my growing needs?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

You state the agent agreed to sell a portion that is currently under construction. What exactly do you mean by this? Is there an existing building on the land or not? We require a detailed description of the portion in reference.[1]

And Allah Ta’āla Knows Best

Abdullah ibn Mohammed Aijaz

Student Darul Iftaa
Baltimore, USA 

Checked and Approved by,
Mufti Ebrahim Desai.

 


[1] An Introduction to Islamic Finance: PG.66-67