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Fatwa CenterBuying on the Easy Home Policy in Pakistan
Question
I know that banking business is un-Islamic due to Ribaa. However, recently there is a new bank in our country called Al-Meezan Bank. They claim it to be on Islamic lines. They have an Easy Home Policy. In this policy, if you buy a property of let's say of Rs.10,00,000 and they contribute approx. Rs.8,00,000. They become your partner in that house. They have distributed their share in units and every month, you pay an installment, it is like purchasing their share of unit. So every month their share in that house becomes less and less and at the end of the period when you purchase the last unit of their share, you become the owner of that house. The head of that bank is the Chairman of Shariah court. I have also applied for their partnership to purchase a house, but I want to be sure that what I am doing is Islamic. Kindly guide me.
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.
This transaction includes two main contracts:
First: a contract of partnership between two parties whereby they purchase a property together with their money.
Second: a sale contract whereby, one of the partners sells his share in a progressive manner (by installments) to his co-partner until the latter pays out all the amount of the former's share and as a result becomes the only owner.
In this way, this transaction is a form of what is called in Islam "the decreasing partnership." This kind of transactions was discussed by the Islamic Fiqh Council, which emanates from the Organization of the Islamic Conference, in its fifteenth session in
1. Absence of any commitment on the part of any of the partners to buy the share of his co-partner at the same value of that share when creating the partnership as doing so implies a guaranty given by one of the partners to buy the share of his co-partner. Instead, the value of the price of the share should determined according to the market price at the time of the sale or according to the price the two parties agree on at the time of sale.
2. Non-existence of any condition whereby one of the partners bears the expenses of insurance, maintenance and all other charges. Instead, these expenses should be borne on the basis of partnership according each partner's shares.
3. Fixing the benefits of the partnership's parties at currently known rates and it is unlawful to fix a given amount from the benefits, or a percentage of the contribution.
4. Dissociation between the contracts and the requirements relative to the partnership.
5. Prohibition of stating that one of the partners could recover his contribution (investment).
Allaah knows best.
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