Is it permissible to buy a house using Al Barakah for financing. This is how their financing works. Assumming the house cost R400.000. The buyer puts a deposit of R100.000 and takes a loan for R300.000. Al Barakah buys the house and resells it to the buyer for a profit. Assuumg the profit is R100.000 over 5 years. Therefore the buyer needs to pay back R300.000 R100.000 (profit). At the end of the loan period the house would cost R300.000 R100.000 (profit) R100.000 (deposit) = R500.000. The title deed remains with Al Barakah until the loan in payed off. The “profit” is fixed and does not change in the course of the loan period. Is this exceptable ?
If Al-Barakah Bank purchases the house and assumes complete ownership of the house and thereafter sells the house with a specified profit to the purchaser, then it will be permissible.
The purchaser does not take a loan from the Bank for the excess amount to purchase the house.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai