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How can I finance a property with Islamic financing and an additional third party investor?

Answered as per Hanafi Fiqh by Askimam.org

My query relates to the purchase of a residential property as follows:

The purchase price of the property is R1 260 000.00. I put an initial cash deposit of R250 000.00 on the property, with the intention of financing the remainder via Islamic/shariah compliant finance. I subsequently received an additional R400 000.00 towards the deposit from a third party. Therefore the total deposit paid on the property is R650 000.00. The remainder (R610 000.00) will be financed by a shariah compliant bank loan.

The third party wishes to know if:

a) the amount of R400 000.00 can be taken as a share (equal to 31.75%) in the property or will this amount only be regarded as a loan?
b) if it is permissible for the 3rd party to take a share in the property, can this share (31.75%) be re-sold to the purchaser (me) of the property  at a higher amount in order to transfer ownership of the 3rd party’s share to the original purchaser?
c) if this is permissible, how should the contract be drawn up between the purchaser and the 3rd party so that it is Islamically correct?

This question was originally sent on 2 March 2016 but I have not received a response yet.

Jazakallah for your assistance.


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

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

The 3rd party can invest with you through a diminishing musharakah contract whereby they own 31.75% of the house. The shares of the 3rd party will then be reduced gradually as you pay off the installments.


Details of this contract and how it works can be seen at Ask Imam #31860 at the following link: http://www.askimam.org/public/question_detail/31860


And Allah Ta’āla Knows Best 

Mufti Sohail ibn Arif,
Assistant Mufti, Darul Iftaa
Chicago, USA

Checked and Approved by,
Mufti Ebrahim Desai.

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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