Conventional and Islamic finance of home purchase : ISNA Canada house financing model

Fatawa Question

[Question one] : Assalamu 'Alaykum Dr. Kahf, I know that you must be extremely busy, but I need an answer to a rather urgent / important question. My wife and I have four days to decide whether or not we will be purchasing a home here in Edmonton and have considered working with ISNA Canada's housing cooperative for the home's purchase. I had initially thought that the housing cooperative divides profits and losses, but as it turns out, they don't. I've attached their rules and regulations to this email, but here's what the clause states : The transaction of sale between the IHC and the Occupant member will be based on the original purchase price of the housing unit. My discussions with their head office have indicated that if a member were to resell their home, the cooperative would first, sell the home back to the member at the price the home was originally purchased...the member would, in turn, resell the home on the market thereby incurring 100 % any profits or losses. [Question two] : 1. Is this sort of arrangement invalid (wherein risk is not shared between the two parties) ? 2. If it is valid, does it conform to the 'spirit' of the law ? In other words, has the agreement been worded such to frame this clause in permissibility, but in effect, run counter to the 'spirit' of the prohibition of Riba ? A prompt reply would be greatly, greatly appreciated and result in several du'as for the good doctor) P. S. A note : previously, when Ansar Co. was under the direction of ISNA Canada, the resale clause read as follows : as a result of completion of 100 % ownership or sale / transfer of the housing unit, any gain or loss realized, will be divided as follows : 1. 90 % to the member and 10 % to the Co-operative, if at that time, the member had accumulated shares equivalent to more than 50 % of the cost of the housing unit ; 2. 80 % to the member and 20 % to the Co-operative, if the member had accumulated 50 % shares or less of the cost of the housing unit. This gain or loss will be shared after making an adjustment for authorized improvements, expansions and certain legal expenses incurred by the member [Question three] : Many thanks for your prompt reply. For clarification : Are you suggesting that it is better for there to be no shared risk between IHC and the "member" ? Wassalam, Farooq

Fatwa

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Publication Date

2010-07-21

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Housing
• Financing
• Loans
• Purchasing
• Real property
• Commercial finance companies
• Usury
• Subprime mortgage

No. of Pages

3

Data Type

Fatawa

Language

English

Record ID

BIM-734956

• APA
• MLA
• AMA