Pooling money together to purchase a property in partnership

Answered according to Hanafi Fiqh by Muftionline.co.za

Q: Mr Company intends buying a property for R10 million. They have R4 million available and want others to invest the remainder of the money with them. Ishaaq, Saleem and Faheem are willing to invest. Ishaaq will invest R3 million, Saleem R2 million and Faheem R1 million. They want to invest in it on a diminishing mushaaraka basis. The profits and losses will be shared according to the capital contribution, and the company is willing to pay all 3 of them off in approximately 5 years.

Assuming that the property yields a rental income of R100 000 a month (R1.2 million a year)

Income distribution

 Mr CMr CIshIshSalSalFahFah
Year 140%R48000030%R36000020%R24000010%R120000
Year 255%R66000025%R30000015%R1800005%R60000
Year 370%R84000020%R24000010%R120000
Year 480%R96000015%R1800005%R60000
Year 5100%R1200000

 

Purchase of Shares by Mr Company

 Mr CMr CIshIshSalSalFahFah
Year 140%R4 mil30%R3 mil20%R2 mil10%R1 mil
Year 255%R5.5 mil25%R2.5 mil15%R1.5 mil5%R500 000
Year 370%R7 mil20%R2 mil10%R1 mil
Year 480%R8 mil15%R1.5 mil5%R500 000
Year 5100%R10 mil

1) Is the above form of investment permissible?

2) Is it permissible to change the profit sharing ratio to suit the needs of the investors, different from the capital contribution ratio? E.g. in the
above scenario Mr Company contributed 40% and Faheem 10%, but in order to please Faheem, they agree to let him take 15% profit while Mr Company takes 35%?

3) Is it permissible to fix an amount to be paid to a certain investor? E.g. every month as a return on your investment you will receive R20 000?

4) Is it permissible to set a fixed percentage of the investment as a return? E.g. we will give you 10% return on your investment monthly?

5) For the sake of ease in distributing the profits, is it permissible to distribute the profits during the year based on estimated profits that will
be received, and at the end of the year, make the necessary adjustments based on the actual profits that were received? Thus at the end of the year the profits will be adjusted for each shareholder in accordance to the actual profits received.

Bismillaah

A:

1) If the profit sharing is in accordance to the capital investment of each shareholder, it will be permissible.

2) It is not permissible

3) It is not permissible

4) As in number 2

5) It is permissible for all the shareholders to draw from the pool with mutual consent. At the end of each term, after the exact amount of profits are worked out, each partner will take his share. If during the year he had drew more than his share, then the extra amount will have to be returned to the partnership.

Note: If after any term any partner does not wish to sell his share or he wishes to sell his share to any other shareholder besides Mr Company or he wishes to sell his share for a higher value than the market value of his share, he has the right to do so. 

And Allah Ta’ala (الله تعالى) knows best.

 

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)

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