Verdict of Majma’ Al-fiqh Al-islami (under the Islamic Conference Organization)
Verdict of Majma’ Al-fiqh Al-islami (under the Islamic Meeting) about the Housing Credit and Government Role (Source: Al-Majma’ Muktamar magazine, episode VI, volume 1, page 81)
Council of Majma’ Al-Fiqh Al-Islami held up the 6th grand meeting in Jeddah, Kingdom of Saudi Arabia, dated 17th-23rd of Sya’ban, 1410 H, coincided 14-20 March 1990 AD.
After studying studies presented to Al Majma’ and regarding the running discussion about the problem of housing credit, Majma’ Al-Fiqh Al-Islami decreed:
Firstly, place for living is among every human’s primary need, thus it must be fulfilled through methods that are permitted in shari’a and using lawful wealth. Whereas methods applied by banks that provide credit service for land, housing, and the like, by lending some funds with interest, whether it is small or large, is prohibited in shari’a since it is included in usurious practice.
Secondly, there are several methods that are allowed in shari’a to replace the forbidden ones in fulfilling society’s demand of housing, among which are:
Government provides place for living for every citizen who needs a residence by special loan to build house. It can use the scheme of soft loan without interest, whether it is a clear cut interest (based on percentage of loan) or camouflaged by administration fee (which amount is not normal). However, if the government needs to obtain fund in order to meet the debt target, the loan should be limited according to the real budget to give the loan.
It is the country that moves first and makes houses and sells it to people who need it with postponed payment, based on confinement according to shari’a.
The investors, both individual or company, build houses, and sell it by credit.
The scheme of selling and purchasing of the house could use the contract of istishna’ – if it is considered as obligatory- thus it is possible for the consumer to buy the house before it is built. Of course it must be done after receiving explanation and detail about the building, thus there will be no misunderstanding. And it is allowed without having to pay it by cash, instead, it is allowed to pay it by credit according to the agreement.
It should also fulfill all requirements and stipulations applied for contract of ishtishna, as the scholars have explained. And contract of ishtishna is different from contract of salam.
And Allah knows best