Q. "The
Fiqh Academy has also allowed installment sales. Does this mean that I
can now buy a house in UK or USA on ins- tallments bearing in mind that
each installment includes repayment of "principal" and "interest".
A. Sale on installment should never be confused with a transaction
of interest bearing loan. In a sale transaction subject mat- ter of contract
is a commodity which should necessarily be owned by the seller at the
time of sale and should be in his possession. But in the case of loan
the subject matter of the transaction is money which is advanced to the
borrower. The house financing schemes generally precticed in the western
countries are based purely on interest. The banks advance mo- ney for
the purchase of the house and charge interest on it. The house is mortgaged
as a security for the repayment of the loan. This transaction has nothing
to do with a transaction of sale on installments.
The house is never purchased by the bank, nor does the bank sell the house
to the customer. The customer purchases the house from a third party and
ows its price to him. The bank comes in only to finance the buyer on the
basis of interest. Therefore, this transaction is a Riba trasaction which
is strictly forbidden and cannot be justified on the presumption that
it is a transaction of sale on installments.
However, if the seller himself sells the house on installments and charges
a price higher than the cash price, or the bank itself purchases the house
from the seller, and after having its ownership and possession resells
it at a higher price to the customer on installments, the transaction
may be valid in Shari'ah, if the necessary conditions of sale are fully
observed as mentioned in the resolution of the Fiqh Academy. But the transaction
generally in vogue in the western countries is not based on the concept
of sale. It is an interest transaction pure and simple, and a Muslim is
not allowed to inter into such transactions.
It is thus clear that your understanding of the resolution of the Fiqh
Academy is not correct.
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