Buying a house on installments for more than the sale price

10-4-2004 | IslamWeb

Question:

Can I arrange to buy a house over a long period of time at a price higher than if I paid the sale price in cash?

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Answer:

Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

 

It is allowed to purchase a house or something else in installments paying more money than its current price.  But the contract should not be made on the basis that if one delays his payment he has to pay some extra amount against this delay, since this is pure Riba  (usury/interest).

However, selling in installments with a price higher than the cash price is allowed.  The rulings of Shariah approve this dealing and there are many benefits for people in this procedure.  The text of the resolution passed in Fiqh Council in its sixth session is as follows:

"Increasing the price in the case of delayed payment is permissible compared to the current price.  It is also permissible to mention the current price of merchandise and the price of delayed payments provided the period is specified at the time of the transaction.  The sale would not be valid unless both parties (the seller and the purchaser) decide on the kind of sale, whether it is in cash or by installment.  If there is indecision concerning the sale, whether the payment is net or delayed, the transaction is not valid".

Allah knows best.