Fatwa ID: 09141
Answered by Mufti Abdurrahman Mohammad
Question:
Is anyone familiar with the pagdi system in India? For shops, is it halal?
In the name of Allah, the Most Gracious, the Most Merciful
Answer:
Summary
The common Pagdi system used for shops in India is not permissible because it involves taking a large deposit (similar to a loan) in exchange for reduced rent. This creates a benefit linked to a loan which is considered ribā. Allah’s Messenger (ﷺ) said: “Every loan, which leads to a benefit, is usury.” (Bulugh Al-Maram, Book 7, Hadith 99). Therefore, such arrangements are impermissible and should be avoided. One should choose a normal rental agreement with fair market rent and no conditional deposit.
The Pagdi System
The Pagdi system is a traditional way of renting where tenants become like co-owners of a property. They get to stay indefinitely, pay low rent, and can pass on their rights to others. Though the system itself is legal, charging a Pagdi premium as an extra payment is banned in many Indian states under rent control laws. This law protects tenants from unfair extra charges while allowing them stable housing. (The Economic Times)
The Pagdi system is a traditional rental arrangement in India where a tenant pays a large one-time amount to the landlord for lifelong tenancy rights at very low monthly rent. Common in older properties, especially in Mumbai, it allows tenants to transfer tenancy with the landlord’s consent. While it offers strong tenant security, ownership does not transfer, and legal validity depends on local rent control laws. (The NoBroker Times)
1. The deposit functions as a loan that generates benefit, which is prohibited
The Pagdi deposit is ultimately a qard (loan) to the landlord, since the money is taken, used, and later returned. If the rent is reduced because of the deposit/loan, this means the borrower (landlord) benefits from receiving the loan, and the loaner (tenant) benefits with lower rent for giving out the loan. Since the deposit resembles a loan and there are additional benefits attached, this setup would be prohibited. [1]
2. A rental contract that includes extra, unrelated benefits becomes fāsid (invalid)
An ijārah (rental agreement) with additional non‑customary benefits for one party (shart fāsid) is invalid. The Pagdi system reduces rent in return for the tenant giving a large sum. This resembles stipulating extra work or benefit upon the tenant, which invalidates the lease. [2, 3]
3. Benefit exchanged for a deferred return resembles ribā
Whenever someone gains a benefit simply for holding another person’s money, this is considered ribā. Any extra gain promised in return, without providing something of real value in exchange falls into this category, such as reduced rent. [3, 4]
The Pagdi system works like an interest-bearing loan. The tenant gives the landlord a large refundable deposit, and in return the landlord charges lower rent. Since the lower rent is a benefit tied directly to the deposit/loan, this arrangement resembles ribā.
Only Allah ﷻ knows best.
Written by Mufti Abdurrahman Mohammad
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham
References:
[1]
(وَأَمَّا) الَّذِي يَرْجِعُ إلَى نَفْسِ الْقَرْضِ: فَهُوَ أَنْ لَا يَكُونَ فِيهِ جَرُّ مَنْفَعَةٍ، فَإِنْ كَانَ لَمْ يَجُزْ، نَحْوُ مَا إذَا أَقْرَضَهُ دَرَاهِمَ غَلَّةٍ، عَلَى أَنْ يَرُدَّ عَلَيْهِ صِحَاحًا، أَوْ أَقْرَضَهُ وَشَرَطَ شَرْطًا لَهُ فِيهِ مَنْفَعَةٌ؛ لِمَا رُوِيَ عَنْ رَسُولِ اللَّهِ ﷺ أَنَّهُ «نَهَى عَنْ قَرْضٍ جَرَّ نَفْعًا» ؛ وَلِأَنَّ الزِّيَادَةَ الْمَشْرُوطَةَ تُشْبِهُ الرِّبَا؛ لِأَنَّهَا فَضْلٌ لَا يُقَابِلُهُ عِوَضٌ، وَالتَّحَرُّزُ عَنْ حَقِيقَةِ الرِّبَا، وَعَنْ شُبْهَةِ الرِّبَا وَاجِبٌ هَذَا إذَا كَانَتْ الزِّيَادَةُ مَشْرُوطَةً فِي الْقَرْضِ، فَأَمَّا إذَا كَانَتْ غَيْرَ مَشْرُوطَةٍ فِيهِ وَلَكِنَّ الْمُسْتَقْرِضَ أَعْطَاهُ أَجْوَدَهُمَا؛ فَلَا بَأْسَ بِذَلِكَ؛ لِأَنَّ الرِّبَا اسْمٌ لِزِيَادَةٍ مَشْرُوطَةٍ فِي الْعَقْدِ، وَلَمْ تُوجَدْ، بَلْ هَذَا مِنْ بَابِ حُسْنِ الْقَضَاءِ، وَأَنَّهُ أَمْرٌ مَنْدُوبٌ إلَيْهِ قَالَ النَّبِيُّ ﵇: «خِيَارُ النَّاسِ أَحْسَنُهُمْ قَضَاءً» .
(Badāi’ Al-Sanāi’ Fī Tartīb Al-Sharāi’, vol. 7, pg. 395, Dār Al-Kutub Al-’Ilmiyyah)
[2]
وَلَوْ اسْتَأْجَرَ دَارًا بِأُجْرَةٍ مَعْلُومَةٍ وَشَرَطَ الْآجِرُ تَطْيِينَ الدَّارِ وَمَرَمَّتَهَا أَوْ تَعْلِيقَ بَابٍ عَلَيْهَا أَوْ إدْخَالَ جِذْعٍ فِي سَقْفِهَا عَلَى الْمُسْتَأْجِرِ فَالْإِجَارَةُ فَاسِدَةٌ؛ لِأَنَّ الْمَشْرُوطَ يَصِيرُ أُجْرَةً وَهُوَ مَجْهُولٌ فَتَصِيرُ الْأُجْرَةُ مَجْهُولَةً وَكَذَا إذَا آجَرَ أَرْضًا وَشَرَطَ كَرْيَ نَهْرِهَا أَوْ حَفْرَ بِئْرِهَا أَوْ ضَرْبَ مُسَنَّاةٍ عَلَيْهَا؛ لِأَنَّ ذَلِكَ كُلَّهُ عَلَى الْمُؤَاجِرِ فَإِذَا شُرِطَ عَلَى الْمُسْتَأْجِرِ فَقَدْ جَعَلَهُ أُجْرَةً وَهُوَ مَجْهُولٌ فَصَارَتْ الْأُجْرَةُ مَجْهُولَةً وَمِنْهَا أَنْ لَا تَكُونَ الْأُجْرَةُ مَنْفَعَةً هِيَ مِنْ جِنْسِ الْمَعْقُودِ عَلَيْهِ كَإِجَارَةِ السُّكْنَى بِالسُّكْنَى، وَالْخِدْمَةِ بِالْخِدْمَةِ، وَالرُّكُوبِ بِالرُّكُوبِ وَالزِّرَاعَةِ بِالزِّرَاعَةِ حَتَّى لَا يَجُوزُ شَيْءٌ مِنْ ذَلِكَ عِنْدَنَا
(Badāi’ Al-Sanāi’ Fī Tartīb Al-Sharāi’, vol. 4, pg. 194, Dār Al-Kutub Al-’Ilmiyyah)
[3]
(وَمِنْهَا) شَرْطٌ لَا يَقْتَضِيهِ الْعَقْدُ وَفِيهِ مَنْفَعَةٌ لِلْبَائِعِ أَوْ لِلْمُشْتَرِي أَوْ لِلْمَبِيعِ إنْ كَانَ مِنْ بَنِي آدَمَ كَالرَّقِيقِ وَلَيْسَ بِمُلَائِمٍ لِلْعَقْدِ وَلَا مِمَّا جَرَى بِهِ التَّعَامُلُ بَيْنَ النَّاسِ نَحْوَ مَا إذَا بَاعَ دَارًا عَلَى أَنْ يَسْكُنَهَا الْبَائِعُ شَهْرًا ثُمَّ يُسَلِّمَهَا إلَيْهِ أَوْ أَرْضًا عَلَى أَنْ يَزْرَعَهَا سَنَةً أَوْ دَابَّةً عَلَى أَنْ يَرْكَبَهَا شَهْرًا أَوْ ثَوْبًا عَلَى أَنْ يَلْبَسَهُ أُسْبُوعًا أَوْ عَلَى أَنْ يُقْرِضَهُ الْمُشْتَرِي قَرْضًا أَوْ عَلَى أَنْ يَهَبَ لَهُ هِبَةً أَوْ يُزَوِّجَ ابْنَتَهُ مِنْهُ أَوْ يَبِيعَ مِنْهُ كَذَا
(Badāi’ Al-Sanāi’ Fī Tartīb Al-Sharāi’, vol. 5, pg. 169, Dār Al-Kutub Al-’Ilmiyyah)
[4]
وَكُلُّ إجَارَةٍ فِيهَا رِزْقٌ أَوْ عَلَفٌ فَهِيَ فَاسِدَةٌ إلَّا فِي اسْتِئْجَارِ الظِّئْرِ بِطَعَامِهَا وَكُسْوَتِهَا. كَذَا فِي الْمَبْسُوطِ.
(Al-Fatāwā Al-Hindiyyah, vol. 4, pg. 442, Al-Maṭba’ah Al-Kubrā Al-Amīriyyah)