Title

Please check this method of Ijarah, is it halal or not? Lots of people in Canada are waiting for an Halal mortgage.

Question

please check this is halal method of ijara or not ,lots of people in canada waiting  for halal mortgage. thanks

Our IjaraTM Home Financing Program was created by a Board of Internationally recognized Shariah Scholars since 1996. The program complies with Islamic Guidelines and therefore is free of both types of Riba and also Gharar.

The program is called "Lease to Purchase" (Ijara wa Iqtina). The Lease to Purchase or Lease to Own contract blends many of the concepts found in traditional lending institutions.  The architects of the 'contract' were guided by three basic principles:

1.      to create a contract for interest-free financing,

2.      to structure the 'contract' so that it upholds the basic rights, duties, and obligations found in traditional home mortgage, and

3.      to retain the income tax deductibility benefits of the traditional home mortgage.

A.    The individual selects the property;

B.    Pays the required on-account payment (traditionally called down payment), which could be 10% to 20% or higher if the individual chooses to do so.

C.    An independent trust holds the title to the property.

D.   The house can be leased for 10, 15, 20 or 30 years, depending on the individual choice.

E.    The lessee pays monthly rent to the trust, also called on-account payments. The trust will pay real estate taxes and property taxes on behalf of the lessee and add these to the monthly rent. At the end of the lease period, the title is transferred to the lessee for a fee of $1.00.

F.     Should the personal situation for the lessee change and he or she has a need to sell the house, the trust is informed of this need and an arrangement is made to sell the house. If the house is sold at a profit, the lessee keeps 100% of the profit. If there is a loss, the lessee bears the first loss.

Even though the 'Lease to Purchase' program was specifically designed to meet the religious obligations of Muslims, it is made available to all qualified people in the United States and Canada that are interested in a Sharia Compliant Financing Product.

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Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

There are three things we need to know before we determine whether a product is Shariah compliant or not.

1.      The concept must be Shariah compliant; for example: Murabahah, mudharabah, mushaarakah…

2.      The actual contract and intricacies of the deal must be Shariah compliant. I.e. Many a times, a financial institution has the correct concept which is Shariah compliant, however, due to some shortcomings and flaws in the contract or terms and conditions, the whole product is rendered impermissible. The contract does not reflect the correct understanding of the scheme.

3.      The implementation of the contract must also be Shariah compliant. I.e. it sometimes happens that a institution has the correct concept and the correct contract and terms and conditions, but the contract is not correctly implemented. For example; in the contract it might be stated that the financial institution has to take possession of the commodity. However, when it comes to the implementation of this step, the financer and the client fail to adhere to this step rendering the deal impermissible.

To assess the Shariah compliancy of the financing product in question, we require a contract of the product from the financial institution. 

Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net