We came across a place that is said to be halal financing, and what is done is someone will purchase the house that you want to buy and then raise the price and sell it to you. So you are actually paying more than the house is worth. Is this sharia compliant?
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
At the outset, three aspects of a financial product must be reviewed for full Shariah Compliance.
1. The concept should be Shar’an acceptable and sound. This means from the beginning of the process to the end, all the particulars of the model should be abided by. Mix and Match is not allowed.
2. The contract and its wording should satisfactory reflect #1 properly. Most companies adopt one of the accepted models for #1 while their #2 is flimsy to utterly unislamic at times.
3. In actual carrying out of each contract, including every aspect of the contract must proceed as expected in a Shariah Compliant manner as well as anticipated chronology. Most finance companies do not even have an in-house independent supervision to check this compliance, let alone them actually knowing if they are making any mistakes in this.
With the above general guidelines being states, the concept mentioned in the question reflect a general Murabaha transaction. This is when the financier buys out the house of interest in its entirety. Thereafter, the financier applies his profit on top of this purchased house, and sells it on to the client on deferred payment. The financier makes his profit from the sale, while the client gets his financing through deferred payments. The concept itself is Shariah Compliant. Keep in mind that this only covers the first #1 in an assessment.
Murabaha model as a mode of financing has his own rules and regulations which should be learnt through some Islamic Finance Course.
If you wish, you could take IF110 – Introduction to Islamic Financing Models [LOGIN REQUIRED] by clicking here. You may also take other available courses through courses.ilmhub.com
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi