Renting A Rented Flat Haram?
Question
Assalamualaikum Brothers and Sisters. So it works out like this, someone needed an X amount of money and own a flat so he decided to give it to me for a year so I can have the rent for a year and then end of the year he will get back his flat and i will get my money back. Theres no extra money or interest involved (meaning the rent payer will not have his rent increased or have their contract changed in anyway). Its a simple ethical trade. Is that considered haram? Thank you
Answer
Wa‘alaykum as-salām wa raḥmatullāhi wa barakātuhu,
The transaction you described, where someone lends money and receives a flat in return to use its rent for a year, alongside the return of the capital, would be impermissible due to the additional rental being considered Ribā (usury/interest).
Ribā refers to any increase in a loan or debt without a corresponding benefit or service. This includes not just monetary interest but also any unjust benefit derived from the exchange of similar items in unequal quantities. Even though your arrangement involves no additional money or interest, the underlying issue is the potential for benefiting from the exchange of unequal values over time.
In Islamic finance principles, earning money through rent (leasing) is permissible under specific conditions, as it involves a tangible asset with ownership and risk-sharing. However, when rent is used as a substitute for interest in a loan arrangement, it becomes Ribā because it involves a guaranteed benefit (rent) exchanged for a loan, which ideally should involve risk-sharing and uncertainty.
While the transaction may seem straightforward and ethical from a conventional perspective, Islamic finance places a high value on avoiding transactions that might lead to exploitation or injustice, even if unintentional. The concern is that such arrangements could potentially lead to practices resembling conventional interest-based loans over time, undermining the principles of equity and fairness in financial dealings.
Therefore, based on the principles of Islamic finance and the prohibition of Ribā, such transactions are not permissible. It is advisable to seek alternative arrangements that do not involve the direct exchange of rent for a loan, focusing instead on models that emphasize equity, risk-sharing, and mutual benefit without compromising Islamic ethical standards.
And Allah subhanahu wa ta’ala knows best.