Ebrahim
bought a house. He started renevotions but due to lack of funds cannot complete
the project. The project anticipates 1 or 2 additional units that can generate
extra income. Ismaaeel  has money and wants to INVEST in this project by
financing the rest of it. The project requires about R100 000 to reach
completion. What is the Shariah way of structuring such an investment? 
How will this work? 

Answer: 

We understand from your query that Ebrahim requires funds to put up the one or two additional units but doesn’t possess sufficient resources to do so. One way of overcoming the issue is as follows; Ismaeel puts up the units with his funds and rents the land from Ebrahim. This means the land will belong to Ebrahim for which he will receive a rental, whilst Ismaeel will own the structure which he may let out on rent. In this way, both parties will be benefitting.

The land may be leased out to Ismaeel (with permission granted to him to put up a structure thereupon), for any duration of time which both parties agree upon. When the lease agreement ceases, Ebrahim may offer to purchase the structure from Ismaeel at a mutually agreed upon price. This is one way of solving the issue.

Another option is where Ismaeel loans part of the funds to Ebrahim. For example, the cost of putting up the units is R100 000.00. Ismaeel loans R50 000.00 to Ebrahim in a separate transaction altogether. Now, Ebrahim and Ismaeel both have R50 000.00 each. The two of them may now enact a partnership whereby they will put up the two units, with each one owning a 50% share in each unit. The rentals accrued will then be split between the two parties. When Ebrahim receives adequate funds at a later stage, he may propose to purchase Ismaeel’s share in the units at any price that both parties agree upon thereby becoming a 100% owner in the property. However, there exists a risk in this scenario, which is, if Ismaeel decides not to sell his part of the unit, then he cannot be coerced into doing so.

These are some of the options that may be implemented.

And Allah Ta'aala knows best!

ANSWERED BY: Mufti Mohammed Desai 

CHECKED AND APPROVED BY: Mufti Muhammed Saeed Motara Saheb D.B 

Date: 19 Muharram 1441 

English Date: 19 September 2019