#Life

To Buy Or Not To Buy, That Is The Question: An Analysis Of Possible Home Purchasing Options For Muslims In The UK

Published

August 26, 2025

Disclaimers:

No. 1. This is not a fatwa (an Islamic legal ruling), I do not have the authority to issue one. This article is simply a summative analysis of some of the possible options available to Muslims, particularly those living in the United Kingdom, to purchase a suitable accommodation and the Islamic positions regarding these options. If you need a fatwa for your specific circumstance, please seek out a qualified, competent, and respected scholar in your locality.

No. 2. The fiqh (Islamic jurisprudence) scope of this article:

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Fiqh is either madhab-based (according to one of the four established legal schools) or comparative, and in both approaches, precise attribution is very important. Therefore, due to my own personal limitations, the fiqh sections of this study will rely on the Ḥanbali madhhab from the works of both classical and contemporary sources.

Where relevant, I will also refer to the following Fiqh councils and Sharia boards: The European Council for Fatwa & Research; Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI); The International Islamic Fiqh Academy (IIFA); and The Islamic Council of Europe. It should be noted that these respected organisations do not always strictly adhere to a single madhab (some may do so depending on the background of its scholars and the community that they serve) and therefore these institutions may incorporate elements from different madhabs when issuing fatwas (legal rulings) and resolutions.

_____________________

Introduction

Muslims in the UK will have a number of reasons for wanting to purchase a home: a genuine need for a place to live for themselves and their families, or even economic reasons such as investing or retirement planning. Differing scholarly views on the methods to purchase a house have always been one of the most intensely debated topics for the last few decades. Despite the numerous fatwas, articles, books, lectures, workshops, and podcasts on the topic, Muslims are far from reaching a decisive conclusion on the matter. This has caused a huge amount of alarm and concern for many Muslims.

In this article, I want to delve into the following topics before concluding:

Social and Private Renting;
Social Dealings and Transactions in Islam;
Conventional Interest-Based Mortgages;
Islamic Home Purchase Plans;
Other alternative ways to purchase a house;
Summary; and
The responsibility on the average Muslim

Before that, let us have a brief look at how the Qur’an and Sunnah view the concept of a home or dwelling.

A Necessity and Place of Peace

A home is one of the basic necessities for a wholesome and balanced life. Allah says in the Qur’an:

“And Allah has made your homes a place to rest…” [Qur’an: 16:80]

“A house in Arabic is called a ‘maskan’ because it offers inhabitants a place away from the demands and pressures of the outside world to find peace, tranquillity, and rest.” [PC: Julian Hochgesang (unsplash)]

The purpose of a house is to allow humans to enjoy peace and comfort for their heart, body, and mind. Since most people work outside of their homes, the real purpose of a home is to return after a hard day’s work and enjoy a sense of peace and rest. In the highly commercial world that we live in, people often spend huge amounts of money on extravagant fixtures and furnishings, which can sometimes diminish the main purpose of a home, which is to bring peace and comfort. When elegant houses are compared to modest (even smaller) homes, the dweller who is blessed with peace and comfort in his heart, body, and mind is certainly in a better position. As we can see, peace is the highest purpose and the greatest aim for possessing a home.¹

In fact, the Arabic term ‘maskan,’ which also means house, is derived from the Arabic verb ‘sakana,’ which means to calm down, to be at ease, and to feel tranquil. Hence, the words ‘sukun’ and ‘sakinah’ mean calmness, tranquillity, peacefulness, serenity, etc.²

Therefore, a house in Arabic is called a ‘maskan’ because it offers inhabitants a place away from the demands and pressures of the outside world to find peace, tranquillity, and rest.³

The Prophet said:

“Part of a man’s happiness includes a good neighbour, a comfortable mount and a spacious abode.”⁴

In another Hadith, he (saw) said:

“Four things are part of happiness: a righteous wife, a spacious abode, a good neighbour, and a comfortable mount. And four things are part of misery: a bad wife, a bad neighbour, a bad mount, and a small abode.”⁵

We are also taught by the Prophet (saw) to make dua to Allah (swt) for a spacious home. The Messenger (saw) is reported to have said in dua one night:

“Oh Allah, forgive me my sins, make my house spacious and bless me in that which You have provided for me.”⁶

Now that we have established that a home is a necessary part of the life of every human being and a cause for their worldly delight, let us explore some of the ways Muslims can secure a place to live in the UK. Some have argued that a residential home can be acquired through renting, whether in the social or private sector, and therefore, purchasing a home is not really required.

Let us start by exploring these two options:

SECTION 1: SOCIAL AND PRIVATE RENTING

Social Housing

Gone are the days when anyone who applied for a home through their local council would eventually be given one to rent (after spending a period of time on the waiting list). Nowadays, for the vast majority of local councils, socially rented homes are reserved for those who have a particular need (e.g., those with a disability) who are unable to rent in the open market.

This is due to the housing crisis in the UK, which is one of the biggest economic and social challenges the country faces. Soaring housing prices, leading to a shrinking social housing stock and increasing homelessness, have left millions of households without the ability to secure stable and affordable housing.⁷

Furthermore, the Localism Act 2011 has seen an end to ‘lifetime tenancies’, allowing local authorities and registered housing associations to offer fixed-term tenancies (ranging between one, two, or five years, depending on the local council) and also introduce different levels of rent (social and intermediate).⁸ Even those with ‘lifetime tenancies’ could face massive rent increases pegged to their earnings or local private rent levels, which has been debated by the Government several years ago. ⁹

Nevertheless, if you are one of those few people in the country with a council home and a lifetime tenancy, and social rent, you are in an extremely rare and privileged position, one that you should be very thankful to Allah for!

Private Renting

In the private sector, there are huge differences in rent levels across the country, making main cities very expensive for those on an average salary. This has led to a new diaspora of young people moving out of big, expensive cities like London to more affordable places in the UK.

Moreover, if you rent from a private landlord, the landlord is entitled to take their property back at any time. They can serve you a notice for eviction and ask you and your family to vacate the property.¹⁰ Coupled with this huge risk of lack of security, private renters also often have to accept very poor living conditions due to the lack of affordable housing in their local area.¹¹

These are some of the challenges that lead some Muslims to the decision of wanting to own their own home in order to avoid the pitfalls of being trapped in private renting.

SECTION 2: SOCIAL DEALINGS AND TRANSACTIONS IN ISLAM

It is important at the beginning of this section to point out the following:¹²

Islam encourages work, development, and progress, as the Messenger of Allah said:

“The strong believer is better and more beloved to Allah than the weak one. Be keen to do what benefits you; rely on Allah and do not act as though you are powerless. When you have a problem, do not say: ‘If I had done such and such, the result would have been such and such’. Rather, you should say: ‘This was decreed by Allah, and Allah does what He wills.’ For saying ‘If’ opens the gate for Satan.”¹³

Allah has entrusted us with the responsibility to care for and cultivate the earth.

While Islam recognises the brokenness of the heart before Allah to be a virtue, it does not condemn wealth and prosperity, nor does it condone poverty. This is clearly shown where the Messenger of Allah said to ‘Amr ibn al-Aaṣ:

“Lawful money is excellent for a righteous man.”¹⁴

In this hadith, there is a reference to the two factors that determine whether or not money is a blessing for someone: how the person acquired it (lawful, i.e., halal money) and how he or she spends it.

Islam cautions that one must rely on Allah , for it is He Who decides who earns money and how much they will earn. A person who seeks money through haram (forbidden) means will not truly benefit from it by becoming content and feeling blessed. The Messenger of Allah said:

“O people, fear Allah and be moderate in seeking a living, for no soul will die until it has received all its provision, even if it is slow in coming. So fear Allah and be moderate in seeking provision; take that which is permissible and leave that which is forbidden.”¹⁵

Finally, wealth is condemnable if it distracts the heart from seeking Allah’s Pleasure, or if it causes one to be arrogant and disrespectful.

Therefore, there is nothing inherently wrong with wanting to purchase a home, whether one is driven by a genuine need or even a wish or desire, as long as purchasing a house can be done in a halal (permissible) manner. Before we look at the means by which Muslims purchase homes in the UK, let us explore the conditions for valid transactions that are found in our books of Fiqh (Islamic jurisprudence).

Selling and Trading in Islam

Selling is permissible by consensus.¹⁶

“Muslim scholars agree on the permissibility of trade in general, as Allah subḥānahu wa ta’āla (glorified and exalted be He) has widened its rulings and has not prevented transactions except if they contain harm for the creation in their religion or their wealth.” [PC: Cytonn Photography (unsplash)]

Allah

says:

“But Allah has permitted trading and forbidden Riba.” [Qur’an: 2: 275]

Therefore, many aspects of trade are halal (permissible) according to the Qur’an, Sunnah, the consensus of the scholars, and qiyas (analogical deduction).¹⁷ Muslim scholars agree on the permissibility of trade in general, as Allah has widened its rulings and has not prevented transactions except if they contain harm for the creation in their religion or their wealth.¹⁸

Pillars & Conditions required for Halal (Permissible) Transactions in Islam and their possible Hinderances or Impediments

The following is a summarised framework based on the authorised Hanbali view from ‘Sharḥ al-Muntaha al-Iraadaat’:¹⁹

Pillars:

The two contracting parties

The object of sale

The format of offer and acceptance, whether verbal or non-verbal

Conditions:

Legal maturity of both parties

Mutual consent

The object is inherently sellable

It is owned by the seller

It is deliverable

6 & 7. It is known to both parties, as is the price

Hindrances:

Sales during a prohibited time, such as during the Friday khuṭbah

2. Sales that entail riba or lead to harm

3. Sales that damage social cohesion, such as outbidding or soliciting another’s offer

4. Sales by a city dweller on behalf of a nomad

Parties to a contract can also place conditions within a contract; these conditions within trade transactions can either be valid or invalid.²⁰

Valid Conditions:

Valid conditions are those that do not invalidate the aims and objectives of the contract and therefore must be fulfilled.

The Prophet said:

“Muslims must keep to the conditions they make.”²¹

The first type of valid conditions of trade agreements is those that support and facilitate the contract by conferring a benefit on the seller or the buyer, e.g., taking a deposit or deferring payment.
The second type of valid conditions of trade agreements is those that stipulate using the product in a certain way. E.g., a seller of a house can stipulate that the new owner stay for a certain period before selling again.

Invalid Conditions:

The first type of invalid condition is that which nullifies the whole contract, e.g., stipulating a contract within the main one. An example is when someone says, “I will sell this item to you on condition of you renting me your house.” This is because the Prophet forbade concluding a selling contract based on another conditional contract.²²
The second type of invalid condition is a condition that is null and void itself, but it does not nullify the entire contract. For example, a seller imposing on a buyer that he must never sell the item that he had bought. This is invalid because the Prophet said: “If anyone imposes a condition which is not in the Book of Allah, then that condition is invalid even if he imposes it one hundred times.”²³ This condition is invalid, but that does not invalidate the whole contract.

Therefore, a sale is permissible (halal) as long as the above-mentioned pillars and conditions of a valid sale are fulfilled and the transaction is free of any hindrance to validity and free from an invalid condition that nullifies the whole contract. This opens up the possibilities of options in a contract where either party (the buyer or the seller) can cancel the deal before parting²⁴ or after parting if there was a violation (cheating or deception).²⁵

Riba (usury)

The greatest hindrance in a contract is Riba (usury). Dealing in Riba is one of the gravest sins. All of the heavenly revelations have prohibited dealing in Riba, and Allah warns those who deal in it with the severest of threats.

Allah, the Most High, says in the Qur’an:

“Those who consume Riba will stand (on Judgement Day) like those driven to madness by Satan’s touch.” [Qur’an: 2: 275]

And:

“Allah has made Riba fruitless and charity fruitful. And Allah does not like any ungrateful evildoer.” [Qur’an: 2: 276]

He (swt) also says: “O believers! Fear Allah, and give up outstanding Riba if you are (true) believers.” [Qur’an: 2: 278]

Because,

“If you do not, then be aware of a war with Allah and His Messenger! But if you repent, you may retain your principal – neither inflicting nor suffering harm.” [Qur’an: 2: 279]

In addition to these Qur’anic verses that warn against Riba, the Prophet has also stated that Riba is one of the great destructive sins.²⁶

What is Riba?

Linguistically, the word Riba in Arabic means an increase, while in Fiqh, it refers to an increase in particular things. It is divided into two categories²⁷: Riba al-Nasi’ah (Riba of Delay) and Riba al-Fadl (Riba of Excess):

A. Riba al-Nasi’ah (Riba of Delay)

This type of Riba refers to a delay of two types:

First Type – increasing the debt on the borrower of money (by way of an interest rate). This is the origin of Riba al-Jahiliyyah (pre-Islamic period of ignorance)²⁸. This is when a creditor lends money, then, when the time comes to pay, he offers the person in debt more time to pay in return for more money to be paid in addition to the principal debt. This results in an excessive increase in debt and the inability of the borrower to be able to pay off the debt.
Second Type – selling goods of the same type but in excess, with a delay in the delivery. There are many examples of this, such as selling gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, as the Prophet said:

“Gold is to be paid for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, like for like and equal for equal, and payment is to be paid hand to hand.”²⁹

This type of Riba also includes selling any type of these items for the same on credit.

B. Riba al-Fadl (Riba of Excess)

This type of Riba refers to selling an item for another of the same type but in excess or taking something of a superior quality for its inferior quality. The Prophet stated that this kind of transaction is prohibited in six items: gold, silver, wheat, barley, dates, and salt.³⁰

As for the modern currency that exists, such as banknotes, the same ruling of gold and silver also applies to money as they share the same property as gold and silver (value that can be measured).

Riba can also occur when lending money against a specified interest rate. This is where a person or institution (like a bank) gives a loan to a customer with the condition that the loan be paid back (either in full or in instalments) with additional interest. The ‘interest’ here falls into both types of Riba (an-Nasi’ah and al-Fadl) and therefore, paying it is from amongst the major sins. The same applies to loaning someone money with the condition that they pay back the loan with additional ‘interest’ on top. This is the most common form of Riba in the modern financial systems, and it is the complete opposite of what Allah describes a qard’ hasana (goodly loan) should be.

Allah says:

“Who is that would loan Allah a goodly loan, so He may multiply for him times over.” [Qur’an: 2: 245]

This verse refers to all forms of spending for the sake of Allah which includes lending money to those in need. It likens these acts of spending to giving a loan to Allah which indicates a great reward and virtue of giving interest-free loans to people.³¹

Also, the Prophet said:

“Whenever a Muslim gives a fellow Muslim a loan twice, it will be like giving charity once.”³²

Therefore, although lending money when someone who is in financial difficulty contains a risk, it is ultimately considered an act of kindness. Relieving the distress of any believer is greatly appreciated by Allah, who will, in turn, relieve the distress of the lender.³³

Thus, lending money is from amongst the best types of sincere actions; it is a contract of excellence and kindness. However, if there is a stipulation for compensation or benefit, and this becomes part of the agreement, then all of these types of loans that bring about benefit are usurious.³⁴

A War with Allah and His Messenger !

It is this type of Riba (Riba al-Jahiliyyah)³⁵ where the lender lends money and then (for additional time / late payment) adds more interest when the customer is unable to pay is the type of Riba threatened with a war with Allah and His Messenger (saw). Allah (swt) doesn’t mention anyone with the threat of war in His revelation except for three people:³⁶

a) the polytheist;

b) the usurer; and

c) the one who shows hostility to His walee’ (close servants of Allah).³⁷

Moreover, Allah does not confine the sin to the lender on interest alone; the borrower who pays the interest, the writer of the promissory note, and the witness to it are also accomplices to this major sin as the Prophet warned:

“Allah has cursed the one who takes interest, the one who pays it, the two persons who witness the deed, and the one who writes the contract.”³⁸

Therefore, depositing money into a bank and receiving interest is also prohibited as it is a form of Riba.

Wisdoms Behind the Prohibition of Riba

The underlying reason for the prohibition of Riba is that it involves injustice, unfairness, and encourages inequality, which Islam forbids due to its deep concern for the moral, social, and economic welfare of mankind.³⁹

Some of the wisdoms include:

(a) protecting foodstuffs from being monopolised by people who can get larger quantities of the food used by poor people, in exchange for the better kinds that they possess;

(b) Earning money through interest means there is less incentive to work;

(c) It allows raising the value of capital in the face of labour by allowing money to beget money rather than through real investment and dependency on labour;

(d) Interest can lead to greater gaps between the economic levels in society;

(e) Interest has the power to trap the poor into vicious cycles of debt, leading to bankruptcy;

(f) Charging interest on loans makes people less likely to do the good deed of offering interest-free loans;

(g) People are more likely to take part in productive business ventures that involve some reasonable risk if there is no interest;⁴⁰

Thus, in a society where interest is lawful, the rich benefit from the suffering of the poor and as a result the rich continue to get even more wealthier while the poor get poorer. This creates socio-economic classes separated by huge gulfs, leading to anger, envy, hatred, and contempt of the poor towards the rich, which in turn, threatens the social order of society and encourages civil unrest.⁴¹

‘Interest’ vs Riba – are they not the same thing?

It should be noted here that although the word interest has become synonymous with Riba in our modern age, not every ‘interest’ equates to the major sin of Riba. It is important to clarify the difference between the financial term ‘interest’ and the Sharia (Islamic Law) term ‘Riba.’ They are not always the same thing, as there are some transactions that contain ‘interest,’ however, they are permitted by the Shariah as that particular type of interest does not equate to Riba.

One example is ‘bay’ al-ajil (deferred payment sales).⁴² It is permissible even if the instalment price is higher than the upfront cost, as agreed by The International Islamic Fiqh Academy (IIFA) of the Organization of Islamic Cooperation (formerly the Organization of Islamic Conference), in Resolution # 51 (6/2), where they stated:

“Increasing the price for deferred payment over the immediate payment is permissible. It is also permissible to state the price of the commodity for the immediate and deferred payments. However, the transaction is not valid unless the two parties of the contract agree on the form of the transaction: immediate or deferred.⁴³“

For example, if someone purchases a phone and it has two prices: an upfront purchase price of £500 or an instalment price of £550 (to be paid in twelve instalments with the additional interest of 10% – £45.83 each month). This additional £50 added to the price of the phone is due to the 10% added interest. However, because the timeline and figures have been agreed upon from the onset, the vast majority of scholars would permit such a transaction. This is provided that the item is going from the seller to the new owner without the intervention of a third-party finance company.⁴⁴

As we have illustrated, many types of transactions are permitted in Islam, but for the purpose of this article, let us focus on the following halal (permissible) transactions in Islam:

Buying;⁴⁵
Selling;⁴⁶
Renting/leasing;⁴⁷
Loans (giving and receiving);⁴⁸ and
Mortgages.⁴⁹

It is well known that buying, selling, renting, and giving/taking a loan are all permissible so as long as conditions of the Sharia are met (e.g., consent, ownership, etc) and none of the impediments are present (e.g., invalid condition, Riba, etc). A lesser-known fact is that a mortgage is actually allowed in Islam.

Mortgaging refers to placing an item with a lender in order to secure a loan; collateral in case of non-fulfilment of the loan. This is permissible according to the Quran, the Sunnah, and the consensus of the Scholars.⁵⁰

Allah says in the Quran:

“… And if you are on a journey and cannot find a scribe, then a security deposit [should be] taken.” [Qur’an: 2: 283]

It is also known that the Prophet himself took a mortgage when borrowing from a Jewish trader in Madina.

A’ishah narrated:

“The Prophet passed away while his shield was mortgaged with a Jew for thirty sa’⁵¹ of wheat.”⁵²

Hence, it can be seen that there is nothing inherently haram (unlawful) regarding mortgages in enough of themselves. So, what is it then that makes conventional interest-based mortgages a forbidden transaction and therefore clearly haram?

SECTION 3: CONVENTIONAL INTEREST-BASED MORTGAGES

In a conventional mortgage transaction, four things are taking place:

Buying and selling: person A is purchasing a house from person B, who is intending to sell his/her house.;
Borrowing money: Person A is borrowing money from a bank to pay person B for the purchase price of the house;
Mortgage: the bank that is lending the money will only do so by placing the house at their disposal (as collateral) to guarantee that the debt is repaid; and then
Repayment with added ‘interest ’: the money that was borrowed from the bank will now have to be repaid over 25-30 years in monthly instalments with added interest on top of the principal loan. This interest rate is reviewed every two to five years, depending on when the fixed rate of interest expires.

As we have seen, the above three transactions appear in our classical books of fiqh (Islamic jurisprudence) and are therefore considered to be valid transactions. If that is the case, then why are mortgages considered haram?

Islamic mortgaging. [PC: Jakub Zerdzicki (unsplash)]

From the above illustration, the answer is obvious – the main thing that makes purchasing a house with a conventional mortgage haram is the fourth stage (repayment of the loan with added interest).⁵³ The addition of interest on the loan, which has to be paid over time, makes the contract a Riba contract as it falls into both types of Riba (an-Nasi’ah and al-Fadl) and is therefore forbidden in Islam.

However, the European Council for Fatwa and Research states that it is permissible to use a conventional mortgage to purchase a house in one limited situation.⁵⁴

The scholars who advocate this view still reiterate the clear Sharia position – that dealing with interest is haram (forbidden) and is one of the greatest sins; however, they make an exception to someone purchasing a house for the purpose of residence only.⁵⁵

These respected Scholars urge Muslims living in the West to do their best to establish alternatives that are acceptable to Islam, and if a person can rent without causing himself much hardship, then he should be content to do so. However, if a person has no other place to live and does not have enough money to purchase the house outright, and taking a mortgage is the only alternative, they state that a person can do so as long as the following conditions are strictly observed:

The house to be purchased must be for the buyer and his household;
The buyer must not have another house; and
The buyer must not have any surplus of assets that can help him buy a house by means other than mortgage.

This fatwa is based on the following two major juristic considerations:

Juristic Consideration No. 1: The agreed-upon juristic rule, which states that extreme necessities turn unlawful matters lawful.

This rule is derived from five Quranic texts, amongst them:

“But whosoever is forced by necessity without wilful disobedience, nor transgressing due limits; (for him) certainly, your Lord is oft-Forgiving, Most Merciful” [Qur’an: 16: 115]

Moreover, jurists have established that hajah (need), whether for an individual or a group, can be treated in equal terms with darurah (extreme necessity). Hajah or need is defined as those things that put Muslims into some difficulty. Darurah (extreme necessity), on the other hand, is that which Muslims cannot manage without. Allah has lifted difficulty as stated in Surat Al-Hajj and Al-Maidah:

“And He has not laid upon you in religion any hardship” [Qur’an: 22:78], and “Allah does not want to place you in difficulty, but He wants to purify you, and to complete His favour to you that you may be thankful.” [Qur’an: 5: 6]

Any house that meets the criteria set up by the definitions of hajah and darurah, as mentioned above, is one that is suitable for the Muslim family in terms of size, location, locality, and amenities.

The fatwa is built on the rule of darurah or hajah, which is treated in a similar manner to darurah; the Council stresses that there is another rule that governs and complements the rule of extreme necessity and need. This rule states that what has been made permissible due to extreme necessity must be dealt with great care and taken in measure. It should be restricted to the category of people who are in real need of a house. Moreover, this fatwa does not cover taking up a mortgage to buy a house for commercial reasons or for any purposes other than personal use (residence).

Juristic Consideration No. 2: It is permissible for Muslims to trade with usury and other invalid contracts in countries other than Islamic countries.

This opinion is held by a number of renowned jurists, such as Abu Hanifah, his colleague Muhammad As-Shaybani, Sufayn At-Thawri, Ibrahim An-Nakha`ie, and, according to one opinion of Ahmad Ibn Hanbal, which was declared as true by Ibn Taymiah, according to some Hanbali sources. It is also the declared opinion of the Hanafi school of jurisprudence.⁵⁶

However, despite the arguments put forward by senior scholars such as the late Dr Shaykh Yusuf al-Qardawi (rh), this fatwa has been extensively challenged by many notable scholars⁵⁷, including Dr. Shaykh Salaah as-Saawi (AMJA) in his book ‘A Polite Reconsideration of the Fatwa Permitting Interest-Based Mortgages for Buying Homes in Western Societies.’

Dr Shaykh Salaah as-Saawi argues that the two juristic principles upon which this fatwa relies have been misapplied and therefore the fatwa is erroneous. Here is a summary of his examination of the fatwa:

(I) Regarding Juristic Consideration No. 1 (extreme necessities turn unlawful matters lawful), Dr. as-Saawi argues:

In fiqh, hajah (need) is whatever is required for ease and the removal of constriction, which usually leads to difficulty and hardship, accompanied by the loss of benefit. If it is not taken care of, then in general, it causes difficulty and hardship;
The concessions are only valid to take advantage of when the person is practically involved in their causes, e.g., one intending to travel cannot benefit from the concessions of travelling merely through the intention; rather, he must be practically involved in travelling.
As for the difference between hajah (need) and darurah (necessity), the two can be differentiated from several aspects, including:

1) Necessity is more severe than need – necessity is based upon doing what is an absolute must, and a person cannot leave it, whereas need is based on making things easier, which a person can do without;

2) Necessity allows the forbidden, whether the necessity affects an individual or the community. In contrast, need does not entail allowing the forbidden, unless the need is that of the general community. This is because every individual has unique needs all the time, and it is not possible to have a specific law for every person, unlike necessities, which are rare;

3) The exclusive ruling that applies to necessity is a temporary allowance of what is forbidden by the text of the Shari’ah. This allowance ends with the disappearance of that necessity and is limited to the person for whom the allowance is due to his necessity.

As for rulings which are established based on need, they do not revoke any text of the Qur’an & Sunnah, but only oppose principles and qiyas (analogical reasoning), and they are established in a permanent manner by which those in need and others can benefit from them.

Therefore, even though a home is, without doubt, one of the necessary needs of the human being that must be fulfilled, it does not have to be acquired through ownership only. Rather, this need can also be fulfilled through renting or any other way in which a home can be acquired.

(II) Regarding Juristic Consideration No. 2 (the permissibility for Muslims to trade with usury and other invalid contracts in non-Muslim countries), Dr. as-Saawi argues:

In the presence of clear, definite texts transmitted regarding the prohibition of riba al-nasi’ah, the evidence, which is assumed to be from the Hanafi school, is very weak and cannot be relied upon;
The other widely-followed Madhabs (schools of jurisprudence) did not accept the view of the Hanafis in this matter, and even Abu Yusuf, student of Imam Abu Hanifah rejected this view.;
Thus, Hanafis do not permit riba or other definitely prohibited matters in non-Muslim countries, as is often mistakenly assumed.

A summary of Shaykh as-Saawi’s study:

1) The prohibition of riba in both its forms, fadl and nasi’ah (which includes the prohibition of bank interest) must be emphasised and endorsed. This is what was established by all the fiqh assemblies in different parts of the Islamic world;

2) Riba can only be permitted by necessity. Anyone who is faced by a situation of necessity must turn to the people (of knowledge) who have the authority to issue a fatwa whom the person trusts regarding their knowledge, so that they can determine the extent of his necessity;

3) Need is treated like a necessity in allowing the forbidden when the required conditions are fulfilled. These conditions can be summarised as follows:

The occurrence of need according to its Islamic legal understanding. This is to repel harm and weakness, which diverts people from engaging in and carrying out the matters of livelihood, not for comfort and luxury;
The absence of valid alternatives. This means that the haram is widespread, and all paths to the halal (e.g., renting) are blocked; and
The lack of capability to move to other areas where valid alternatives can be found.

4) Therefore, the basic principle regarding one who is unable to own a home in a halal way involving no riba or doubt is to be content with renting;

5) When renting entails difficulty and clear hardship due to the size of the family or other factors, it is allowed to grant them a concession to own a house in this manner, in light of the rules mentioned above. This is only after consulting with the people of knowledge to determine the extent of this need;

6) It is a necessity to provide Islamic alternatives to the problem of financing housing. This is either by creating Islamic institutions or by persuading the Western banks to amend their contracts in dealing with the Islamic minorities in such a way as to agree with the requirements of Islamic Law;

7) Appealing to those capable in the Islamic world to build investment projects to provide housing for those needing it amongst the Muslims settled in Western societies. Such projects could be via the well-known forms of valid transactions such as musharakah, murabahah, istisna’, renting-ownership schemes, etc.⁵⁸

SECTION 4: ISLAMIC HOME PURCHASE PLANS

“Legal maxims play an important role in interpreting and applying Sharia principles to contemporary financial practices.” [PC: Signature Pro (unsplash)]

The topic of Islamic Mortgages or ‘Home Purchase Plans’ (HPPs), as they are widely known, falls under the category of financial transactions in our books of Fiqh (Islamic jurisprudence). The framework for governing these transactions has been derived from the Qur’an, the Sunnah, Ijama’a (consensus of jurists), and Qiyas (analogy). A deductive study of these evidences has led to the establishment of several rules and governing principles (legal maxims) for determining the Islamic rulings of financial transactions. Legal maxims play an important role in interpreting and applying Sharia principles to contemporary financial practices.

A note on the Maxims of Islamic Law (Qawa’id al-Fiqhiyya)

In terms of the acceptance of legal maxims of the Sharia among the scholars, they are divided into the following two categories: a) maxims, which are accepted and utilised by all scholars from different schools of Islamic law (madhabs); and b) maxims that are accepted by scholars from certain madhhabs, but rejected by others. The following are five comprehensive major maxims in Islamic Law (fiqh) that are accepted by scholars from all four of the legal schools (madhabs), even though they may disagree on how they are applied to specific matters of fiqh:

Matters are determined according to intentions;
Hardship entails ease;
Harm must be eliminated
Certainty is not overruled by doubt; and
Custom is a basis for judgment.⁵⁹

These five major maxims also have branches that lead to further corollary maxims which can be applied to Islamic financial contracts.⁶⁰

Some of the other important Islamic legal maxims that are applicable specifically to Islamic financial contracts include (but are not limited to):⁶¹

The default position of contracts is that all contracts and transactions are halal (permissible) and correct, and no contracts can be considered as haram (impermissible) except with evidence from the Qur’an and Sunnah of the Messenger (saw);⁶²
All contracts must be free from gharar (gross uncertainty), dhulm (harm), and Riba (usury);⁶³ and
The essence of contracts is their goals and meanings, not their words or forms.⁶⁴

Therefore, in order for HPPs to be considered Islamically impermissible, a scholar would have to prove in a substantial way, the presence of one or more of the following in the contract:

Gharar (gross uncertainty/ambiguity);
Dhulm (harm);
Riba (usury);

With these principles and rules in mind, let us now look at Islamic mortgages – more commonly known as Home Purchase Plans (HPP), which are intended to be structured in a way to help avoid Riba. Currently, there are three different types of HPPs:⁶⁵

A. Ijara (a rent-only agreement – the alternative to the conventional ‘interest-only’ mortgage):

The bank buys the property you want to buy, and you pay them rent with the condition that you buy the property from them at the end of the term.

The bank also leases the house to you for a fixed term at an agreed monthly rent.

B. Murabaha (profit sale).

The bank buys the property and gradually sells it to you at a mark-up price, which you pay in monthly instalments.

The ijarah model is most commonly used for buy-to-let properties, whereas murabaha is most commonly used for commercial properties. These type of agreements are rarely used for UK residential home purchases.

C. 𝗗𝗶𝗺𝗶𝗻𝗶𝘀𝗵𝗶𝗻𝗴 𝗠𝘂𝘀𝗵𝗮𝗿𝗮𝗸𝗮𝗵 (partnership):

This is the most common way residential home purchases are currently conducted. In this model, the bank will own most of the house (typically 80%), and the customer will own the remaining 20%. The bank will lease the customer their portion, the customer then pays the bank monthly rent for the portion that the bank owns, while also slowly buying back shares of the house – purchasing equity, until the customer eventually has 100% ownership.

Examining the different contracts that are currently available in order to discuss their merits and defects according to the Sharia is a highly laborious and technical exercise that is beyond the scope of this article. Therefore, let us limit our exploration to the most common way banks offer Islamic finance products finance residential homes, which is the Diminishing Musharakah + Ijarah contracts.

*Case Study: a closer look at the Diminishing Musharakah + Ijarah method***

The next few steps will illustrate what happens in an Islamic Bank HPP contract, which will help us establish the facts and thus help us understand the substance of the contract:

Step 1: The bank and the customer purchase a house together for an ‘acquisition cost’ of £100K. The customer pays £20K and the bank pays the remaining £80K. This gives the customer a 20% ‘initial share’ of the house, and the bank retains the remaining 80% of the share.

Step 2: The customer then signs a co-ownership agreement to reflect his/her shares. In the same co-ownership agreement, the customer must agree to buy the bank’s ‘Initial Share’ of the Property for the ‘Acquisition Cost.’

The above two steps conclude the Diminishing Musharakah agreement.

Step 3: The bank then requires the customer to simultaneously enter into a ‘lease agreement.’ In this agreement, the bank requires the customer to pay rent on their ‘share’ of the house for as long as the customer hasn’t fully paid off the bank’s share of the property.

This is where the Ijarah agreement comes in.

Step 4: The customer will also take out the relevant buildings insurance to insure the property.

This is another obligation the customer alone takes responsibility for.

Step 5: Completion – the customer moves into the property, pays monthly rent + acquisition payments for around 25 – 30 years until they have purchased all of the bank’s shares. At this point, the property will belong to the customer fully.

The above is a very simplified illustration, and this type of Diminishing Musharakah + Ijarah transaction method is currently used by most banks and is approved by respected Islamic scholars.⁶⁶

However, critics of this model have argued the following:

a) HPPs are a debt instrument, and therefore contain Riba

When the customer signs a co-ownership agreement to reflect his/her shares and agrees to buy the bank’s share of the property for the acquisition cost, this clause, in substance, results in the bank selling its ‘initial share’ to the customer immediately. It also results in the co-ownership effectively coming to an end. This is because the customer has now purchased the bank’s share and has full beneficial ownership and full risk of the house, as the bank no longer takes risk in the property. The customer now owes the bank £80K as a money debt, which the bank agrees the customer can pay over several years.

Despite the fact that both English law and Islamic law recognise beneficial ownership, here, the sale has taken place from the very first day, and the customer begins to owe the bank a money debt. A binding obligation to purchase now and a binding obligation to purchase in the future both create a money debt.

Result: Critics of this method conclude that the above example indicates that this type of HPP is a debt instrument, and therefore any ‘rent’ payable by the customer is actually Riba.

Some other contentions of HPPs in general include:

b) With HPPs the Bank does not fully share the ownership risk;

In the case of HPPs, if the bank buys 80% and the customer buys 20% (as illustrated in the above example), then the bank owns the majority of the house. It should therefore be obliged to fulfil the duties of an owner and share the risk of loss. However, in an HPP, the customer pays the stamp duty, takes out the buildings insurance, and is ultimately responsible for any damage to the property.

Also, if the value of the houses decreases, a customer who defaults under such contracts can find himself required to guarantee the bank’s original capital contribution to the property purchase, which is higher than the decreased lower price. This is called negative equity. In a true musharakah agreement, loss and gain must be shared equally.

c) Combination contracts

The Prophet said:

“It is not permissible to sell something on condition that the purchaser lends you something. And it is not permissible to have two conditions in one transaction. And no profit is permissible unless possession has been taken of the goods. And you cannot sell what is not in your possession.” ⁶⁷

Modern HPPs have two (or sometimes more) contracts for every purchase (co-ownership agreement, leasing agreement, service agency agreement, etc), where each contract is interdependent on the other.

d) Islamic Banks use the LIBOR to set the rent, rather than using the local rent levels

This does make the HPP more affordable; however, using the LIBOR (The London Inter-Bank Offered Rate) is the same method used by conventional banks to calculate interest rate averages.

Setting rental levels in line with market interest rates is not in itself haram, just like a Muslim restaurant owner can sell non-alcoholic mocktails at the same price as alcoholic cocktails. However, linking the rent levels to LIBOR can cause gharar (gross uncertainty) in the contract. This is because the customer won’t know how much rent to pay the bank until the beginning of each new period, despite being contractually bound to rent the property for the subsequent period. If interest rates increase dramatically, then the amount of rent will also increase, and the customer may find himself locked into the payment of very high rental rate that he/she cannot afford.

e) Fractional reserve banking and money creation

Most of our money supply is created by private banks that deal in interest (Riba), who simply create money. Unfortunately, some Islamic banks have been found to do the same.⁶⁸

f) HPPs use hila (legal trickery)

Islamic law also prohibits hila (legal trickery) as a mechanism to avoid clear haram acts. This can produce a usurious loan from otherwise permissible contracts.

Scholars who oppose the current Diminishing Musharakah models offered by Islamic banks also argue that each of the steps in the transaction (i.e., buying, leasing, promising to purchase, etc) are, on their own, perfectly fine and valid according to the Sharia. However, when these transactions are combined and one agreement depends on the other, the outcome results in a Riba contract.⁶⁹

For example, in the following framework, the individual transactions mentioned below are completely halal:

An interest-free loan (which is something that is recommended);
A gift (which again, is something recommended); and
A promise.

Taken individually, these three transactions are completely valid. However, if they are combined in a single contract, where one agreement is contingent on the other, the result is Riba.⁷⁰

Shariah standards of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) on Diminishing Musharakah contracts

It is worth noting that although the Shariah standards of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), while recognising and approving Diminishing Musharakah contracts, they prohibit the following:

The promise to purchase further shares should be independent of the partnership contract. Therefore, it is not permitted that one contract be entered into as a condition for concluding the other;
It is not permitted to stipulate that one partner bear all the cost of insurance and maintenance on the ground that he will eventually own the subject matter of the partnership;
It is not permitted to stipulate that the equity share be acquired at their original or face value, as this would constitute a guarantee of the value of the equity shares of one partner (the bank) by the other partner, which is prohibited by the Sharia.⁷¹

Scholars who oppose the HPPs that are currently available do not permit them, as they sincerely believe it is possible to produce genuinely Shariah-compliant Islamic property financing contracts under English law. Furthermore, they feel that to permit the current models on purely contractual grounds is a flawed strategy for the Muslim community in the UK. Moreover, it is argued that this will risk the development of home purchasing products that include a proper implementation of Islamic finance principles and, therefore, may be a tool for the suppression of the beginning of an interest-free economic renaissance.⁷²

Scholars who champion the current HPP structures, however, have detailed responses to the above-mentioned criticisms.⁷³ Here is a brief summary of the way they respond to some of the criticisms:

(I) HPPs are a debt instrument, and therefore contain Riba

This is a mischaracterisation of the HPP construct because when a customer purchases a home, the following is taking place:

The Islamic bank is an entity that owns the freehold and holds it on trust for the customer. The customer is then gradually buying out the Islamic bank;
Therefore, the customer is not the owner of the house from the very start.

An Islamic HPP is understood under English law to slowly facilitate the gradual transfer of beneficial ownership from the bank to the homeowner.

(II) With HPPs the Bank does not share in ownership risk fully

The Sharia allows for any party to forgo their right as long as this is mutually agreed upon. For example, a wealthy woman can forgo her right over her husband to spend on her. Therefore, whatever is mutually agreed upon before the contract is concluded must be abided by as the Prophet said:

“The Muslims are bound by the conditions, except for a condition that forbids what is permissible or permits what is forbidden.”⁷⁴

(III) HPPs use combination contracts

HPP is based on two independent contracts;
As long as the two contracts can be clearly distinguishable and broken into separate parts with no interlinking, and there is clarity on the price and the items, then this would be permitted by the Sharia.

(IV) Islamic Banks use base-rate-pegged values to set your rent, rather than using the local rent level

There is nothing inherently wrong (impermissible) in using any external factor (including LIBOR) to calculate rent.

The above are very simple summaries of often very highly technical arguments made by scholars who have sufficient knowledge, education, training, and practical hands-on experience, both in terms of the Sharia and the UK law (England & Wales), as well as awareness of industry expectations and norms.

Irrespective of which side seems more convincing, it is impossible for the average Muslim (non-scholars and specialists) to take a definitive view either way, doing so would be very disingenuous.

SECTION 5: OTHER ALTERNATIVE WAYS TO PURCHASE A HOUSE

The final option to purchase a house is via the new models of Islamic home financing that have emerged over recent years. These are known as Shared Ownership Products and are provided by companies like WayHome, Your Home, Keyzy, CrowdToLive, Heylo, and Pfida (formerly Primary Finance), amongst others.

These models are all different from the conventional mortgages and Islamic HPPs and provide an alternative debt-free financing structure.

From a Sharia perspective, there are currently no objections to these new Shared Ownership Products⁷⁵, meaning they are fully Sharia-compliant.

However, there are some practical drawbacks, which include:

Currently, these products are not regulated by the Financial Conduct Authority (FCA) as they act more like a landlord than a traditional bank;
Customers will be paying the market rate rent on the portion that they do not own of the purchased property;
Lack of FCA authorisation also means: a) with some companies, customers are not allowed to fully purchase the entire house due to tax reasons; b) other companies will charge the customer double stamp duty (as the exemption only applies to regulated institutions like Banks); c) there is less clarity and transparency as to what a customer is actually paying compared to the mortgage market (as there is no obligation for these companies to be transparent like regulated bodies); and d). Shared Ownership Products are more expensive than conventional mortgages and Islamic HPPs;
Accessibility is also another issue, as customers have to get onto long waiting lists (up to five years) to access some of these products. However, with companies like Pfida, investing with them can radically reduce this time on the waiting list.

Despite this, these companies offer new and innovative ways of operating, which include:

Allowing the customer to take a payment ‘holiday’ and pay through equity;
Supporting the customer during the process of buying and helping to vet the house, and even to negotiate the deal with the vendor;
Allowing customers to purchase a home with no upfront deposit and simply pay through the rental agreement; and
Allowing the customer to continue renting the portion of the house that the company owns with no obligation to purchase further shares.

SECTION 6: SUMMARY

In summary, we have discussed the following:

Option A: Renting – we have seen that acquiring a home to rent from a social landlord is almost impossible for most people. Renting from a private landlord comes at a huge risk and can be very expensive depending on where you choose to live. However, since there are obviously no Sharia objections to renting, this remains a good option for most people.

Option B: Taking a conventional interest-based mortgage – the ‘one house for residential purposes’ rule to permit a conventional mortgage still remains the official opinion of the European Council for Fatwa and Research. This verdict is for residential homes only (not buy to let) and is limited to one per person, i.e., a home to live in, not to do business or rent out to make money from. However, from the onset, this fatwa has been extensively challenged by senior scholars and therefore remains very controversial.

Option C: Islamic Home Purchase Plans – this option is also not free from issues. All the scholars and specialists in the field of Islamic finance will agree that Islamic HPPs are certainly far from perfect in terms of meeting the full requirements of the Sharia. The divergent Scholarly opinions range from some scholars permitting HPPs (despite their flaws) due to our modern economic and commercial context at one end of the spectrum,⁷⁶ to other scholars concluding that Islamic HPPs are exactly the same as interest-based mortgages, if not worse, and therefore also haram.⁷⁷

Option D: Shared Ownership Products – these products do not have any Sharia objections; however, they are more expensive and come with practical challenges, such as accessibility, as well as structural issues relating to the lack of FCA approval and regulation.

SECTION 7: THE RESPONSIBILITY ON THE AVERAGE MUSLIM REGARDING THIS TOPIC

As we have seen, Option A: renting (social or private) and Option D: opting for a new type of shared ownership product are completely free from any Sharia objections, and neither option involves any kind of debt, like taking out an interest-bearing mortgage. On the other hand, purchasing a home through a conventional mortgage or an Islamic HPP remains a very controversial issue with diverse views and opinions on either side. The fatwa to permit the use of an interest-based mortgage is a matter of ijtihad (a struggle to exercise personal judgment in Islamic Law by a qualified scholar). Likewise, the current models of HPPs are also the result of scholarly ijtihad. Hence, there may never be a uniform opinion regarding either option, as opinions based on ijtihad will always have an element of doubt and never reach a state of certainty like matters where permissibility and prohibition are very clear and well known.

The Ulema (scholars) have stated that if the fuqaha (Islamic jurists) reach the degree of ijtihad and issue a verdict, they will be rewarded for their efforts even if they are wrong, as the Prophet said:

“If a judge gives a verdict according to the best of his knowledge and his verdict is correct, he will receive a double reward, and if he gives a verdict according to the best of his knowledge and his verdict is wrong, even then he will get one reward.” ⁷⁸

This Hadith exonerates the mujtahid (scholar capable of ijtihad) from sin, and promises him a reward because he is qualified to make ijtihad and he has done his absolute best, but it also clearly states that he can be mistaken.

If the scholars differ on a matter, the correct view is that one of the positions has to be incorrect, as something cannot be simultaneously halal and haram in the sight of Allah . So, what then must the average Muslim (layman) do regarding these heavily contested differences of scholarly opinion?

The answer is the following, where Allah says in the Qur’an:

“Ask the people of knowledge if you do not know.” (Qur’an: 16:43)

The Prophet said: “If you did not know, why didn’t you ask, the cure to ignorance is to ask.”⁷⁹

With heavily contested and debated issues such as this, the laity are not required to examine and understand all of the evidences and intricacies regarding both sides of the argument. However, despite this, it is still very important for Muslims to be somewhat acquainted with an overview of the various arguments offered by different scholars, as well as the drawbacks to these arguments, in order to make an informed decision if they intend to go down the route of purchasing a house.

Even after reading through the arguments, sincerely conducting your own thorough research, consulting people of knowledge, the average Muslim will still have to largely rely on taqleed (choosing a scholar or a fatwa issuing authority) who is qualified and trustworthy, and then following that scholarly view on this particular matter. This type of taqleed is permissible for the ordinary person or even a person of knowledge who has not reached the status of Ijtihad in knowledge or in a particular field, because the one who is limited in a particular field is like an ordinary person in it.⁸⁰ And if and when a person takes a decision based on a valid ijtihad, then it is impermissible for anybody to criticise him.⁸¹

However, it is very important to note that Muslim scholars have unanimously agreed that it is totally prohibited (haram) for a Muslim to follow the compromises and concessions of scholars, such that a person finds the concession of a particular scholar and then follows it.⁸²

A note on Muslim unity

While these issues are fiercely debated by scholars on both sides who hold strong views regarding these matters, it is important for us not to let these issues of Fiqh (Islamic jurisprudence) cause any disunity amongst the Muslims.

Allah commands us to:

“And hold firmly together to the rope of Allah⁸³ and do not be divided. Remember Allah’s favour upon you when you were enemies, then He united your hearts, so you – by His grace – became brothers. And you were at the brink of a fiery pit and He saved you from it. This is how Allah makes His revelations clear to you, so that you may be (rightly) guided.” [Quran: 3:103]

He also tells us that:

“The believers are but one brotherhood, so make peace between your brothers. And be mindful of Allah so you may be shown mercy.” [Quran, 49:10]

Regarding unity, our Prophet (saw) said:

“The believers, in their mutual love, mercy, and compassion, are like a single body: if one part of the body feels pain, the whole body responds with sleeplessness and fever.”⁸⁴

He also said:

“Do not envy one another, do not hate one another, do not turn away from one another, and do not undercut one another in trade; but be you, O servants of Allah, brothers.”⁸⁵

Therefore, it is extremely important to ensure that no matter what opinion you follow, or how strongly you feel about a certain issue, that these matters of fiqh differences should never be the cause of sectarianism and disunity in the Ummah.

SECTION 8: CONCLUSION

As Muslims, we must exercise caution in regard to every aspect of our faith.

A note on Taqwa (God-consciousness) and Wara’ (scrupulousness)

Tawqa means being God-conscious and living a life of righteousness, piety, and self-restraint from all sinful acts.

Allah says

“O you who have believed, have tawqa and be with those who are truthful” [Qur’an 9:19]

The Prophet said:

“Have taqwa wherever you are, follow a bad deed with a good deed and it will erase it, and behave with good character towards people.”⁸⁶

Wara (scrupulousness), on the other hand, entails not only striving to stay away from things that are haram (unlawful) as well as exerting one’s best to avoid that which is disliked (makruh), but it also entails abstaining from all doubtful matters in fear of falling into haram. Wara also means staying away from some halal things due to fear of it leading to something that is haram or makruh.

The Prophet said:

“The halal is clear and the haram is clear, and between them are matters unclear that are unknown to most people. Whoever avoids these unclear matters has absolved his religion and honour.”⁸⁷

He also advised:

“Leave that which you are in doubt for that which you are in no doubt.”⁸⁸

The above two Hadiths indicate that when the scholars differ on a matter, it is recommended to remove oneself from the difference by doing an action that the scholars agree upon.⁸⁹

The temporary nature of this life

In the end, we must constantly remind ourselves that this world is temporary and our real home is in the Hereafter, in Paradise.

Allah tells us that:

“Every soul will taste death, and you will only receive your full reward on the Day of Judgment. Whoever is spared from the Fire and is admitted into Paradise will (indeed) triumph, whereas the life of this world is no more than the delusion of enjoyment.” [Qur’an: 3:185-191]

He also tells us that:

“This worldly life is no more than play and amusement, but far better is the (eternal) Home of the Hereafter for those mindful (have tawqa of Allah). Will you not then understand?” [Qur’an: 6:32]

But if there is a real and pressing need to purchase a home, we must do so whilst maintaining our duty and faithfulness to Allah .

After weighing out the arguments both in favour and against, as well as the practical, legal, and financial challenges, a strong contender seems to be Pfida⁹⁰ for the following reasons:

Debt-free

There is no obligation to purchase the company’s share of the property. There are also no early or late repayment fees for not purchasing equity.

Not pegged to interest

The rent is not pegged to interest rates or LIBOR. Instead, it is determined by a number of factors, including the local rental market, and annual rent reviews are capped to reduce uncertainty.

Affordability

The property is sold to the customer at the original purchase price, and not at the current market value. They provide rental discounts to make sure it remains affordable for the customer.

True risk sharing

If the property decreases in value or there is a shortfall upon sale, proceeds are split according to respective partnership share. This is fundamentally different from a bank, which has the first call on the proceeds of a sale, and the customer may end up with nothing upon repossession.

Ultimate flexibility

Customers can manage their Pfida home account online to change the target equity payment when they need to or opt to pay rent only in any given month.

Choosing what to do with your equity

By introducing an equity buffer, means that there is less risk of defaulting on payment. This allows the customer to pay in equity if they cannot afford the rent. They can also then purchase it back again once they are in a better financial position, in their own time.

The model adopted by Pfida is fully Sharia-compliant and seems to offer a true risk-sharing partnership.

Allah knows best, and may His peace and blessings be upon our Prophet Muhammad , his family, and all his Companions.

***

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Ghazali, Nasrun Mohamad, Sawari, Mohd. Fuad Md, Ghalia, Bouhedda and Alhabshi, Syed Musa Syed Jaafar, ‘The Fiqh Maxim Al-Ghunm Bi Al-Ghurm: A Critique on Interpretation of the Maxim Relating to the Risk-Return Concept in Islamic Banking and Finance,’ (ISRA International Journal of Islamic Finance, Volume 16, Number 2, 2024)
Ibn Taymiyyah, Taqi al-Din, ‘al-Qawa’id al-Nuraniyah’ (Dar Ibn Jawzi, 2012)
Ibn Nujaym, Zain al-Abideen ibn Ibrahim bin Muahmmed al-Shaheer bi ‘Asbah wa an-Naza’ir ala Madhab Abi Hanifa an-Nu’man’ (Dar al-Kutub al-Ilmiyya, 1999)
Isma’eel, Dr. Mohammed Bakr, ‘al-Qawa’id al-Fiqhiyya baina al-asa’la wa tawjih,’ (Dar Manar, 1997).
Khattab, Dr. Mustafa ‘The Clear Quran’ (theclearquran.org)
Khan, Ibrahim ‘Islamic Mortgages are a debt and therefore haram – Why this Analysis is Mistaken’ (islamicfinanceguru.com)
Khan, Ibrahim ‘What is An Islamic Mortgage? Why is it Islamic?’ (islamicfinanceguru.com)
Philips, Dr. Abu Ameenah Bilal ‘A Commentary on Usool al-Fiqh Made Easy,’ (United Arab Emirates, 2003)
Ramli, Muhamad Amirol bin, ‘ISC550 – Qawaid Fiqhiyya – Kitab Review – Book Review – Ashbah wan Nazair fi Qawaid wa Furu’ Fiqh Syafi’yyah – Jalahuddin as-Suyuti,’ (MARA University of Technology, www.researchgate.net/publication/371137887, 2023)
Saleem, Haider, ‘Pros and Cons of an Islamic Mortgage’ (www.islamicfinanceguru.com)
Saleem, Haider ‘What Makes an Islamic Mortgage Halal?’ (islamicfinanceguru.com)
Sharief, Dr Salah, ‘Buying a House with a Mortgage: A Muslim’s Dilemma’ (www.linkedin.com, May 2024)
Saiti, Buerhan & Abdullah, Adam. ‘The Legal Maxims of Islamic Law (Excluding Five Leading Legal Maxims) and Their Applications in Islamic Finance,’ (JKAU: Islamic Econ., Vol. 29 No. 2, pp: 139-151 (July 2016) DOI: 10.4197 / Islec. 29-2.12
Umar, Dr. Shaykh Sajid, ‘Fatwa: Student Loans are Permissible’ (www.islam21c.com)
Yusuf, Bassam ibn Sulayman ibn Ali, ‘Hilyatu adh-Dhakha’in wal-adab bi-shar Nur al-Basai’r wa al-baab’ (Waqfiyyatu at-Tahbir, 2018).
‘Al-Qawa’id Al-Fiqhiyyah (Legal Maxims of Islamic Jurisprudence): A Translated Compilation’ – written by Islamic University of North America (Mishkah), 2013
Lecture notes from ‘The Coherence of the Sharia’ by Dr. Hatem al-Haj

Websites

www.qur’an.com
www.aboutislam.com
www.tenantsupporthelpline.co.uk
www.prince-evans.co.uk
www.shelter.org.uk
www.aaoifi.com
www.amjaonline.org
www.islamicfinanceguru.com
https://iceurope.org/
www.pfida.com
www.e-cfr.org
https://shamela.ws

Lectures

Islamic Finance Q&A – Dr. Yasir Qadhi and Dr Main Al-Quda (www.youtube.com)
Islamic Financing / Mortgages – Dr. Yasir Qadhi and Dr Hatem Al-Haj (www.youtube.com)
Leasing a Car with instalment payments at a Higher Price – Dr. Yasir Qadhi (www.youtube.com)
What every Muslim Needs to know about Riba – Dr. Yasir Qadhi (www.youtube.com)
Ruling on Mortgages & ‘Sharia Compliant’ Loans – Dr. Yasir Qadhi (www.youtube.com)
Islamic Mortgages: Everything you need to know, how they work, where to get one and how (www.youtube.com)
Where to get a UK Islamic Mortgage in 2024? (www.youtube.com)
Are Conventional Mortgages halal if there’s no alternative? (www.youtube.com)
Islamic Mortgage Alternative – Primary Finance – The Deep Dive (www.youtube.com)
Is Islamic Banking Really Islamic? An insider’s view with Harris Irfan (www.youtube.com)
No Riba House for Muslims Finally – Pfida’s Home Provision Scheme (www.youtube.com)
The Riba Series – Mufti Faraz Adam (www.youtube.com)
The Coherence of the Sharia – Dr. Hatem al-Haj (www.youtube.com)
Khulasa Qawa’id al-Fiqhiyya – Al-Mushayqih, Dr. Khalid (www.youtube.com)

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