In recent days the developers in UAE are selling the properties (flats, villas) on just acquiring the land, before the start of the construction, they just make a plan and take the amount in form of multiple installments like
10% down payment
Then 10% every year till 4 years
Then 50% on completion of the construction of the property.
The property is then hand overed after full payment (that is 100%).
My question is that many people don’t wait for the completion (or in some cases even don’t wait for the start of the construction) and sell the property in between like after one year or just on the booking amount by taking premium (profit), the rest of the installments in this case will be paid by the new buyer (and the contract is transferred to the new buyer), Is this trade (both buying and selling case) true as per Islamic laws?
If no, how this trade can be transformed into an Islamic one.
In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatoh
The mentioned manner of selling the property by transferring the contract to the new buyer before the original purchaser takes possession of the property is not permissible.
و لا يجوز اى لا يصح بيع السمك في الماء قبل صيده لانه بيع ما ليس عنده او بعد صيده ثم القي فيه و لا يأخذ منه الا بحيلة للعجز عن التسليم (اللباب في شرح الكتاب ج 1 ص 211 قديمي)
However, if certain strict conditions are adhered to, it would be permissible for the original purchaser to enter into a permissible sale contract with the new purchaser referred to as a parallel Istisnā‘ contract. An Istisnā‘ contract is a like a build-to-order contract where the seller enters into an agreement with the purchaser on a certain commodity at a certain price which the seller has yet to build or manufacture. The initial contract between the purchaser and developers is this type of contract. A parallel Istisnā‘ contract is where the first purchaser enters into another Istisnā‘ contract with another purchaser. However, in this contract the first purchaser will now assume the role of the developer or seller. The second purchaser will have the right to agree to purchase the commodity yet to be built from the seller. However, this demands drawing up a completely separate and independent contract for this new transaction. Furthermore, once the construction of the building is complete, the initial purchaser must take possession of it from the developer; thereafter, he can forward it to the second purchaser. It will not be permissible for the initial purchaser to transfer the ownership of the property from his name to the name of the second purchaser as this falls under the ambit of selling that which one does not possess. The first contract of Istisnā‘ must come to fruition and then terminate between the developer and the initial purchaser through the transfer of ownership from the developer to the initial purchaser. Thereafter, the initial purchaser can forward the property to the new purchaser to complete the second contract of Istisnā‘. However, it is not necessary for the initial purchaser to delay entering into the second contract until after he takes possession of the property. He can enter into the second contract before the completion of the project.
Despite the permissibility of such a contract, it is somewhat complicated. Therefore, it will be preferable to abstain from entering into such contracts due to the fear of not fulfilling some of its fundamental requisites. If there are any pious Ulamā competent in the field of Islamic Finance, you can request their assistance in arranging such a contract for you. Otherwise, we would advise against such contracts.
And Allah knows best
Ml. Yusuf bin Yaqub,
Student Darul Iftaa
Ml. Ehzaz Ajmeri,
Student Darul Iftaa
Darul Iftaa, Madrassah In’aamiyyah