Friday, December 1, 2017

How to Buy a House in the West Without Riba

One of the major financial goals of an average family in North America is to purchase a home and the conventional way to do it is to take out a mortgage. Conventional mortgages are not permissible in Islam as they involve dealing in riba.  Allah (SWT) says in the Holy Quran:

Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So, whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein. (2:275)

O you who have believed, fear Allah and give up what remains of interest, if you should be believers. And if you do not, then be informed of a declaration of war against you from Allah and His Messenger. But if you repent, you may have your principal - thus you do no wrong, nor are you wronged (2:278-279)

A lot of the Islamic financial alternatives are not really halal as they are the same conventional mortgages presented in a different way. One solution that stands out as being genuinely Islamic and practical is that of diminishing partnership (musharikah naqissiyah), where by an Islamic housing cooperative and the investor jointly buys the house. The investor pays a rent for that portion of the house he does not own and as he pays more to the cooperative, his share of the house increases and the share of the cooperative decreases and thus so does his rent. A time comes when the investor completely owns the property. The drawback to this scheme is that most Islamic housing cooperatives ask for a significant amount of from the investor to start with. If you study the scheme closely you will find that this is not too difficult to fulfill. Investors can buy housing cooperative shares over a long period of time, before they decide to invest in a home. The same way people put away a small amount regularly for the children’s education or a major investment, a family can regularly buy some shares. They will get a halal profit from the cooperative for those shares from the rent the cooperative makes from its home purchases. In time, the family will have significant shares for a down payment.

Many Muslims dismiss such schemes because they do not want to go through this process. They would rather do things the “easy way” and get instant results by signing a mortgage agreement. They make excuses saying the Islamic financial system cannot be established except after an Islamic government is established as was done in Madianh. Thus, in its absence, they wrongly feel justified to deal with riba. If one follows this logic one can say that alcohol was not prohibited until after an Islamic government was established in Madinah. As we do not have an Islamic government, so can they conclude that Muslims can drink and deal with alcohol?

The truth is that there are a lot of benefits in the financial struggle one undertakes to keep his investments halal. It requires serious planning, risk management, patience, thrift, curbing self-indulgence, constantly working on one’s ability to earn through learning and upgrading skills, tawakkul on Allah and charity. It might sound counter intuitive, but the best way to earn more is to give more in charity. Just as a blood donor’s body reacts to a blood donation by increasing its ability to produce more blood. Charity increases our abilities to earn more. By cutting back on our wants and regularly giving away wealth, we raise our abilities to earn and give even more. If the wealth of such donations is pure, then its effects and rewards are also multiplied. Curbing out wants protects us from the destructive factors that wealth might produce in ourselves and in our families.

If we deeply think about the issue of home ownership for Muslims in the West, it is not really a problem. In fact, it is Allah’s blessing. It is not true that there is no halal and practical solution to this issue. The solution requires self-discipline which leads to the producing noble qualities in our characters and improvement in our skills. With so much benefits, who can genuinely complain about the issue of home ownership and contract a conventional mortgage?

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