Real Estate Developer Business

30 Jun 2024 Ref-No#: 6098

Assalamu Alaikum Sheikh.

I intend to start a real estate development business of constructing apartments and selling them. There shall be no involvement of Riba in the construction of the building as I plan to invest my savings into the business. However, many of the customers resort to interest based loans when buying the apartments. Is it permissible for me to sell an apartment to a customers who has acquired interest based loan from the bank to pay for the apartment?

Furthermore, to get the loan approved, the client needs documents regarding the land. As a buyer he is naturally entitled to this document.

Am I sinful for sharing the documents (which the client naturally has the right to demand as a buyer)?

Am I also sinful to accept the payment from the buyer provided that he has acquired the sum from an interest based loan?

Answer

Wa‘alaykum as-salām wa raḥmatullāhi wa barakātuhu,

Starting a real estate development business and navigating these ethical considerations within Islamic finance are paramount. Below, we address the concerns you’ve raised regarding this business venture and its adherence to Islamic principles:

Selling apartments to customers with interest-based loans:

As a developer selling apartments, it is incumbent upon you to ensure that your transactions align with Islamic ethics.

    • Permissibility of selling to customers with interest-based loans: It is permissible to sell property to someone who has acquired funds through Ribā-based means, provided that you are not actively involved in advising, facilitating, or securing a conventional loan for the purchaser. While taking a Ribā loan is sinful for the buyer, the seller’s role is limited to the sale transaction itself. You will not be sinful for accepting payment from the bank.

Providing land documents to clients:

    • Client’s entitlement: Buyers have the right to receive all necessary documents related to the property they are purchasing. Providing these documents is not only permissible but also a legal and ethical obligation to ensure transparency.
    • Ensuring legal compliance: It is crucial to ensure that all transactions comply with local laws and regulations. This includes verifying the accuracy and legality of all land documents provided to buyers. You would not be sinful for this.
    • Focus on the Sale: Your primary business function is facilitating a legitimate sale – providing an apartment in exchange for a price. The financial source of the buyer’s funds is beyond your direct control.

Suggestion:

    • Discouragement: You may gently discourage clients from opting for Ribā-based loans. Offering alternative financing options, where feasible, can align with Islamic principles and provide ethical alternatives.

In conclusion, engaging in real estate development and sales is permissible within Islamic guidelines, provided that one avoids involvement in brokering or facilitating interest-related transactions. It is essential to maintain transparency, legal compliance, and ethical standards throughout all business dealings.

May Allāh guide you in your business endeavors and grant you success in adhering to His commands.

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