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Is it permissible to use a deposit given to a landlord for construction purposes?

Answered as per Hanafi Fiqh by Darulifta-Deoband.com
I am living in a 1 BHK flat whose rent is 1,000/- and deposit amount I gave him is 1 lakh which I will get back in-shaAllah after 2/3 years. The amount which I gave him, he used it to construct the same flat. Is the above deal halal? And one more that I wanted to know what is pagdi system which is mentioned as haram?

Answer

(Fatwa: 428/428/M=1433)

If due to pagdi system the standard rent was decreased then this dealing is not free from the doubt of interest. One should avoid such dealings. If due to deposit amount there was no concession in the rent of house but the rent was equal to rent that usually is charged in that area, then this dealing is right.

Allah (Subhana Wa Ta’ala) knows Best

Darul Ifta,
Darul Uloom Deoband

This answer was collected from the official ifta website of Darul Uloom Deoband in India.

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