Home » Hanafi Fiqh » Askimam.org » I am establishing a Mudharabah which will be called Yaz Capital Partners (http://www.yazcapital.com) to raise funds to invest in real estate in the United States. I have some questions regarding setting up a business. Would it be permissible to setup the business in this manner?

I am establishing a Mudharabah which will be called Yaz Capital Partners (http://www.yazcapital.com) to raise funds to invest in real estate in the United States. I have some questions regarding setting up a business. Would it be permissible to setup the business in this manner?

Answered as per Hanafi Fiqh by Askimam.org

Dear Muhtaram Mufti Saheb,

Assalaamu Alaikum Wa Rahmatullahi Wa Barakatuhu,

I have some questions regarding setting up a business. Here in the US the real estate market has gone down for the past 5 or 6 years and is starting to rebound. As a result of this there are millions of properties which have been foreclosed on and are owned by the financial institutions. To take advantage of this situation, I am establishing a Mudharabah which will be called Yaz Capital Partners (http://www.yazcapital.com) to raise funds to invest in real estate in the United States. The Mudharabah will join a partnership (Shirkat) to purchase properties with the funds and resell the properties at a profit after developing them. The profit will be shared between the partners of the partnership (Shirkat) as per mutual agreement. Then in turn the Mudharabah will distribute the profits earned between myself and the investors also as per mutual agreement.

Hence, we will be dealing with two contracts, Mudarabah and Shirkat.

It will be established in the state of Virginia near Washington DC. Would it be permissible to setup the business in this manner and also would it be allowed for the Mudharabah to purchase foreclosed properties from US financial institutions which will in turn be sold to either other investors or consumers?

Also would it be permissible to require a minimum investment amount and duration from the investors of the Mudharabah? For example, would it be okay to say that the minimum investment should be US$100,000 and the minimum duration of the investment should be 12 months?

If I need to further explain the business setup please email me at haider@yazcapital.com.

Jazakumullahu Khairan,

Answer

Assalāmu `alaikum Warahmatullāhi Wabrakatuh,

According to your explanation we understand that you will enter into a partnership with your friend and jointly purchase properties with the Mudarabah funds and resell the properties at a profit after developing the properties. The profit will be shared as per mutual agreement. You in turn will distribute the profits earned between yourself and the investors also as per mutual agreement. Hence, you will be dealing with two contracts, Mudarabah and Shirkat.

The Mudarabah will be between yourselves and your investors. You will be the Mudarib.

The second is Shirkat between yourself and your friend. The invested funds of the Mudarabah will be used in the Shirkat.

Such a scheme is Shariah Compliant with the following condutions.

In the Mudarabah:

Find attached a standard Mudarabah Contract. The conditions in that form should be agreed upon. You may download it at :

http://daruliftaa.net/sharcompliancy/Download-document/Mudarabah-Agreement.html

In the Shirkat :

·        The distribution of profit ratio should be agreed upon.

·        If there is a loss, it will be pro-rata the capital investment.

·        As a partner, you should be the actual and real owner of the properties according to the investment ratio.

It is vital that you have a partnership agreement contract signed with each partner outlining the details of the partnership in order to be open, clear and transparent.

And Allah Ta’āla Knows Best,

Muftī Ebrahim Desai

Daruliftaa
35 Candella Rd, Durban, South Africa

www.daruliftaa.net

Original Source Link

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

Read answers with similar topics: