Buying properties on interest loans : housing loan

Fatawa Question

Dear Dr Monzer Assalamu Alaykum Wa Rahmatu Allahi Wa Barakatuh. I have read your website pertaining Riba and housing loans. I am residing in Singapore and there is no Islamic financing for housing loans in Singapore. I have the need to buy a house but put it on hold due to the prohibition of Riba. Something that I read in your website caught my attention but I do not fully understand. These are excerpts taken from your website QA Fatawa Mortgage 2007 ; 1) In one word : interest is an increment in a loan or a debt, profit is a difference in the cost price and sale price of a good or service. Don't be bothered by any other chats and terms. There is no time value of money and no any other thing. 2) Why not going for a lease or for financing from seller, I've seen installment sale contracts from car dealers in Toronto that are exactly compatible with the Shari'ah although the dealer calculated the installments on the basis of interest, that does not matter ! The space does not warrant a detailed explanation of the difference and why installment sale is permissible while a loan with increment is not. You may need to make some homework to get a full grasp of it. The difference is very important though ! My question is, in Singapore the Housing Development Board (HDB) a government body, is building flats / apartments for Singaporeans. Singaporeans who are not able to pay the full cost of the flat, HDB is giving a loan at 2.6 % per annum. In other words, cost price is $ 100K, 10 years installment price of flat is $ 126K. Is this permissible ? Is this a case of “profit is a difference in the cost price and sale price of a good or service” ? Thank you for your time. Regards, Faisal

Fatwa

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Publication Date

2010-12-18

Main Subjects

Economics & Business Administration
Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Housing
• Financing
• Loans
• Usury

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-729732

• APA
• MLA
• AMA