Fatwa ID: 05997

Answered by: Alimah Sofia Mirza

Question:

There is a pre-construction project to be sold on assignment before possession. However, formal mortgage approval is required. Hope not going against the rules. Would this be considered bay’ qablal qabdh?

In the name of Allah, the Most Gracious, the Most Merciful

Answer:

The transaction in which a buyer will purchase a commodity that is not yet in existence is known as ‘Istisnaa’ in Shariah. It has been deemed permissible in Islam and construction falls under this mode of transaction. Mufti Taqi Usmani has mentioned the guidelines of Istisnaa in his book ‘An Introduction to Islamic finance’:

“Istisnaa’ can be used for providing the facility of financing in certain transactions, especially in the house finance sector. If the client has his own land and he seeks financing for the construction of a house, the financier may undertake to construct the house on that open land, on the basis of Istisnaa’, and if the client has no land and he wants to purchase the land also, the financier may undertake to provide him with a constructed house on a specified piece of land. Since it is not necessary for Istisnaa’ that the price is paid in advance, nor is it necessary that it is paid at the time of delivery, (it may be deferred to any time according to the agreement of the parties)18, therefore, the time of payment may be fixed in whatever manner they wish. The payment may also be in instalments. On the other hand, it is not necessary that the financier himself construct the house. He can enter into a parallel contract of Istisnaa’ with a third party or may hire the services of a contractor (other than the client). In both cases, he can calculate his cost and fix the price of Istisnaa’ with his client in a manner that may give him a reasonable profit over his cost. The payment of instalments by the client may start, in this case, right from the day when the contract of Istisnaa’ is signed by the parties and may continue during the construction of the house and after it is handed over to the client. To secure the payment of the instalments, the title deeds of the house or land, or any other property of the client may be kept by the financier as security, until the last instalment is paid by the client. The financier, in this case, will be responsible for the construction of the house in full conformity with the specifications detailed in the agreement. In the case of any discrepancy, the financier will undertake such alteration at his own cost as may be necessary for bringing it in harmony with the terms of the contract.”¹

Hence it will not be considered as bay’ qablal qabd as Istisnaa has been permitted as a means of making it easier for the people and catering to the normality of society.

Only Allah knows best

Written by Alimah Sofia Mirza

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

1 An Introduction to Islamic Finance, Pg. 138,139.