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Fatwa CenterBorrowing and Riba
Question
1) Is there any Riba between Muslim and non-Muslim in land of war as some scholars saying there is no Riba between Muslim and non-Muslim in land of war according to Hadith? 2) Does Australia fall under the criteria of Darul Harb (land of war)? 3) If it does, is that permissible for a Muslim to borrow money from interest based conventional bank to buy a house for their own usage in a non-Muslim country like Australia? 4) If that is permissible, would it also be permissible to buy second home through the same source with same term with the intention to pay the first one quicker due to the increase of value of the property through times. As Allah wants us to be debt free as soon as possible. Example: If I buy only one home (Property A) it might take 25 to 30 years to pay off. But if I buy 2 homes (Property A and B) and 6/7 years later I decide to sell one (Property B). In that situation due to the capital gain from the sale of second property (Property B), I can pay that gain against the first property (Property A). In that way I can pay that off in 10/11 years instead of 25/30 years. Intention here is to get out of debt much earlier and whatever the savings will be for the remaining period can be used to the way of Allah. 5) There are three Islamic finance organizations in Australia. They finance to Muslims under the term of "Musharaka", "Murabaha", and "Izara Wa Iktina". On principal they talk about proper Islamic way of finance but in practically their terms and conditions are very much similar to the interest based traditional bank. Even some of those sources of finance are also from local Superannuation Co, who give them loan based on interest.
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.
All the texts from the Quran and the Sunnah are unanimous in prohibiting Riba (interest and/or usury). This is also the consensus of the Muslim scholars and it is among the evident matters in Islam. Such texts are general. So they include the land of war and that of peace. This is the opinion of the majority of the scholars in the Maaliki, Shaafi’i and Hanbali Schools of jurisprudence.
The Hanafi School is of the view that there is no Riba between the Muslim and the belligerent non-Muslim in the land of war. Their evidence is a weak Hadeeth whose chain is unknown and which cannot be considered an evidence for anything. So, it is unlawful for the Muslim to deal in Riba in Australia or elsewhere.
Allaah Knows best.
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