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Fatwa CenterBought a house through questionable Muraabahah contract
Question
Us-salaam-wa-alaikum WRT, I’ve taken Home Building Loan from Faisal Bank for 20 years on Morabaha agreement. First my property is in my name and original papers are mortgaged in the bank secondly the rate of profit charged by the bank is linked with floating KIBOR (Karachi Inter Bank Operation Rate) + 2% fixed which is changing every year. After studying the Islamic Banking and Riba Issues, I’m convinced that this is RIBA and is prohibited in Islam but my problem is if I sell my Home now and pay off the Bank Loan then I won’t be able to buy a new home due to the inflation. Also, If I take a home on rent then I have to pay high rent and there is no guarantee that after a year or two the landlord will tell me to vacate the property. Is there any flexibility to retain my home as this is the only asset we have. If I go abroad with the clear intention to pay off the loan at earliest to get rid of RIBA would it be OK. What is the correct way. Fi-Amaan-Allah
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.
There is a great difference between borrowing money with Ribaa (interest and / or usury) and Al-Muraabahah (i.e. the bank purchases the item and then sells it to a customer by instalments with profits after the bank had actually possessed it). A loan with Ribaa is a loan which you take and you return with an interest, whether this loan is a price for a house or else, whereas Al-Muraabahah, it is to ask an institution or a bank and the like to buy a given product for you, and you promise them to buy it from them once they had possessed it, on the condition that you would repay by instalments. Then, when the sale contract is conducted between you and them, once they had actually possessed the product, and the contract fulfilled the conditions of a correct sale with instalments and which are mentioned in Fataawa 83725 and 83007, then this is a correct sale contract which did not involve any Ribaa.
Therefore, if you had taken a loan and did not deal with permissible Al-Muraabahah, then you are obliged to repent to Allaah and endeavour to repay the loan if this would help you get rid of the loan which involved Ribaa or reducing it. If there is no other alternative except to sell the house in order to achieve the above, then doing so becomes an obligation unless there is a necessity which prevents from selling the house like not having another accommodation, or that there is another accommodation but you are unable to pay its rent, and the like. The principle in this are the following verses from the Quran.
Allaah Says (what means): {O you who have believed, fear Allaah and give up what remains [due to you] of interest, if you should be believers.}[Quran 2:278]. Allaah also Says (what means): {…while He has explained in detail to you what He has forbidden you, excepting that to which you are compelled.}[Quran 6:119]. Allaah further Says (what means): {So, keep your duty to Allaah and fear Him as much as you can.}[Quran 64:16].
However, if you are obliged to repay the interest whether you repay it at once or delay it and repay it by instalments in their due time, then you are not obliged to sell the house. You are also not obliged to sell the house if it is possible to get rid of repaying those interests or reducing them by repaying the loan in another way, like working and earning money and the like.
Allaah Knows best.
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