Construction with a loan to be repaid from the rent
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The first question of Fatwa No. ( 512 )
Q1: What is your opinion regarding two men, one of whom owns a plot of land, and they intend for the other to pay a sum of money to construct a building on this land, then utilize it for a period of ten years, for example, as a partnership in the rental business between them, sharing the profits equally? After ten years, the landowner returns the amount to its owner, and the land and the building on it remain with the landowner?
A1: If the matter is as you described, that one of the men pays a sum to construct a building on land owned by the other, on the condition that the rental of the building is shared equally between them for a temporary period, such as ten years, after which the amount is returned to its owner, and the land and the building on it belong to the landowner, then this is not permissible; because it is a loan that yields benefit, and it is riba (usury or interest). This is because he paid the amount for the construction to be returned to him after a temporary period, and he benefited from it by half of the rent for the entire specified period. Moreover, the amount used to build the structure may be more than the value of the land, or it may be less, so it is not valid for the rent to be shared equally between them.
And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad and his family and his Companions.
Q1: What is your opinion regarding two men, one of whom owns a plot of land, and they intend for the other to pay a sum of money to construct a building on this land, then utilize it for a period of ten years, for example, as a partnership in the rental business between them, sharing the profits equally? After ten years, the landowner returns the amount to its owner, and the land and the building on it remain with the landowner?
A1: If the matter is as you described, that one of the men pays a sum to construct a building on land owned by the other, on the condition that the rental of the building is shared equally between them for a temporary period, such as ten years, after which the amount is returned to its owner, and the land and the building on it belong to the landowner, then this is not permissible; because it is a loan that yields benefit, and it is riba (usury or interest). This is because he paid the amount for the construction to be returned to him after a temporary period, and he benefited from it by half of the rent for the entire specified period. Moreover, the amount used to build the structure may be more than the value of the land, or it may be less, so it is not valid for the rent to be shared equally between them.
And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad and his family and his Companions.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.