Is the financing by Al Barakah bank permissible : This is a summary of how they operate. 1. A person wants to buy house for R500.000 2. The buyer puts down a deposit of R100.000, and requires a loan for R400.000 3. AlBarakah will buy the house and resell it at R600.000, there buy making a profit of R100.000 At the end of the 10 years the buyer has spent : R100.000 (deposit) R400.000 (value of loan) R100.000 (profit) = R600.000 Note the following : 1. The profit is fixed. 2. Title deed remains property of Al Barakah. 3. Although the outstanding amount may be settled in full before the end of the loan period, surplus cash cannot be put into the account on a monthly basis. 4. Insurance is required on the house.
According to our understanding the procedure of purchasing a house through Al-Barakah Bank is, it (the Bank) purchases a house of R500,000, for example and resells its with a net profit of R100,000. The purchaser then puts a deposit of R100,000 and the remaining R500,000 is paid over a period of time, acceptable and agreed to both parties. The R400,000 is not a loan as it is a part of the purchase amount. The Bank does not require a deposit for the house before aquiring the house as it cannot sell a house which is not in its possession.
We are not aware about the restriction on the monthly surplus cash.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai