Scope

This Shariah Compliance Guidelines covers Shariah rulings for real estate buying, selling, booking of plots, flats & houses, investment & related matters.

Basics & Rules of Sale

‘Sale’ is defined in Shariah as ‘the exchange of a thing of value by another thing of value with mutual consent’. Islamic jurisprudence has laid down enormous rules governing the contract of sale

“Buyer” Who buy something is a Buyer

“Seller” Who sales something is a Seller

Valid Sale:

A valid sale has following essential elements:

1. Contract or Transaction
2. Buyer & seller
3. Subject matter
4. Price

 

1. Contract

Offer & acceptance (Ijab-o-Qobool):

• The term “Offer” means that one person proposes to either sell his commodity to another person or buy from him and
• The term “Acceptance” means that the person who has been offered gives his approval of the proposal.
• Offer and acceptance are always done in past or present  tense
• Future sale is not allowed.

 

2. Buyer & Seller

Both must be

• Sane:

Should be mentally sound at the time of contract.

• Mature:

Should be adult, however, if minor, must understand the nature of the transaction

 

3. Subject Matter

Existence

• The subject matter of sale must exist at the time of sale.

If a non-existent thing has been sold, even with mutual consent, the sale is void according to shari’ah.

 

Ownership

• The buyer must have the title and ownership of goods.

 

Seller must have its Possession

• The subject of sale must be in the physical or constructive possession of the seller when he sells it to another person.
• It was narrated that Hakim bin Hizam said: “I asked the Prophet “O Messenger of Allah, a man may come to me and ask me to sell him something that I do not have. Can I sell it to him then go and buy it from the market?’ He said: ‘Do not sell what you do not have.”‘ (Sunan an-Nasa’i 4613)

 

Types of Possession:

• Physical (Haqiqi)
• Constructive (Hukmi):             Established with
  • Transfer of risk
    • Segregation
      • Free access

 

Shariah Compliant

• Subject of sale should not be a thing which is not used except for a haram purpose,
• Similarly, the good cannot be an unlawful thing

 

4. Price

4.1 Quantified (Maloom)

• The measuring unit of the price should be known

4.2 Specified & certain (Muta’aiyan)

• For a sale to be valid, the price should be ascertained and specified

 

Rules of Sale

 

Rule 1: The subject of sale must be existing at the time of sale.

Thus, a thing which has not yet come into existence cannot be sold. If a non-existent thing has been sold, though by mutual consent, the sale is void according to Shariah.

Example: A sells the unborn calf of his cow to B. The sale is void.

 

Rule 2: The subject of sale must be in the ownership of the seller at the time of sale.

Thus, what is not owned by the seller cannot be sold. If he sells something before acquiring its ownership, the sale is void.

Example: A sells to B a car which is presently owned by C, but A is hopeful that he will buy it from C and shall deliver it to B subsequently. The sale is void, because the car was not owned by A at the time of sale.

 

Rule 3: The subject of sale must be in the physical or constructive possession of the seller when he sells it to another person.

“Constructive possession” means a situation where the possessor has not taken the physical delivery of the commodity, yet the commodity has come into his control, and all the rights and liabilities of the commodity are passed on to him, including the risk of its destruction.

Examples:

(i) A has purchased a car from B. B has not yet delivered it to A or to his agent. A cannot sell the car to C. If he sells it before taking its delivery from B, the sale is void.

(ii) A has purchased a car from B. B, after identifying the Car has placed it in a garage to which A has free access and B has allowed him to take the delivery from that place whenever he wishes. Thus the risk of the Car has passed on to A.. The car is in the constructive possession of A. If A sells the car to C without acquiring physical possession, the sale is valid.

 

Explanation 1:

The gist of the rules mentioned in paragraphs 1 to 3 is that a person cannot sell a commodity unless:

(a) It has come into existence.

(b) It is owned by the seller.

(c) It is in the physical or constructive possession of the seller.

 

Explanation 2:

There is a big difference between an actual sale and a mere promise to sell. The actual sale cannot be effected unless the above three conditions are fulfilled. However one can promise to sell something which is not yet owned or possessed by him. This promise initially creates only a moral obligation on the promisor to fulfil his promise, which is normally not justifiable. Nevertheless, in certain situations, especially where such promise has burdened the promise with some liability, it can be enforceable through the courts of law. In such cases the court may force the promisor to fulfil his promise, i.e. to effect the sale, and if he fails to do so, the court may order him to pay the promise the actual damages he has incurred due to the default of the promisor.

But the actual sale will have to be effected after the commodity comes into the possession of the seller. This will require separate offer and acceptance, and unless the sale is effected in this manner, the legal consequences of the sale shall not follow.

Exception:

The rules mentioned in paragraphs 1 to 3 are relaxed with respect to two types of sale, namely:

(a) Bai’ Salam

(b) Istisna’

 

Rule 4: The sale must be instant and absolute.

Thus a sale attributed to a future date or a sale contingent on a future event is void. If the parties wish to effect a valid sale, they will have to effect it afresh when the future date comes or the contingency actually occurs.

Examples:

(a) A says to B on the first of January: “I sell my car to you on the first of February”. The sale is void, because it is attributed to a future date.

(b) A says to B, “If party X wins the elections, my car stands sold to you”. The sale is void, because it is contingent on a future event.

 

Rule 5: The subject of sale must be a property of value.

Thus, a thing having no value according to the usage of trade cannot be sold or purchased.

 

Rule 6: The subject of sale should not be a thing which is not used except for a haram purpose, like pork, wine etc.

 

Rule 7: The subject of sale must be specifically known and identified to the buyer.

Explanation:

The subject of sale may be identified either by pointation or by detailed specification which can distinguish it from other things not sold.

Example:

There is a building comprising a number of apartments built in the same pattern. A, the owner of the building says to B, “I sell one of these apartments to you”; B accepts. The sale is void unless the apartment intended to be sold is specifically identified or pointed out to the buyer.

 

Rule 8: The delivery of the sold commodity to the buyer must be certain and should not depend on a contingency or chance.

Example: A sells his car stolen by some anonymous person and the buyer purchases it under the hope that he will manage to take it back. The sale is void.

 

Rule 9: The certainty of price is a necessary condition for the validity of a sale. If the price is uncertain, the sale is void.

Example: A says to B, “If you pay within a month, the price is Rs. 50. But if you pay after two months, the price is Rs. 55”. B agrees. The price is uncertain and the sale is void, unless anyone of the two alternatives is agreed upon by the parties at the time of sale.

 

Rule 10: The sale must be unconditional. A conditional sale is invalid, unless the condition is recognized as a part of the transaction according to the usage of trade.

Examples:

(1) A buys a car from B with a condition that B will employ his son in his firm. The sale is conditional, hence invalid.

(2) A buys a refrigerator from B, with a condition that B undertakes its free service for 2 years. The condition, being recognized as a part of the transaction, is valid and the sale is lawful.

 

Shariah Compliance Guidelines for Purchasing/Selling of:

• Plot
• Flats/Apartments
• Houses
• Plots
• Plot can be booked on the basis of “Promise to Sale”
• Selling of Plot/ Plot files before plot’s allocation is prohibited.
• Selling of Plots/Plot files after allocation is permissible.
• According to Shariah, the Rules of sale will be applied on selling of plot.
• Flats/Apartment:
• Flats/Apartments can be booked on the basis of “Istisna (make to order contract)”
• According to Shariah, the orderer/Purchaser cannot sale the flat during the building/constructing period i. e before taking the possession of the flat.
• Houses
• Houses can be booked on the basis of “Istisna (make to order contract)”
• Houses can be purchased on the basis of “Sale Agreement” if house exists.

 

Shariah Guidelines for Real Estate Investment:

Investment should be

• The properties invested in must be used for Shariah compliant purposes and Shariah permissible activities.
• Agreements should be Shariah complaint
• All liquid cash shall be held in Shariah compliant investment accounts.
• If any financings are to be raised for the  acquisition of Properties, such financings shall be raised through Shariah Compliant  modes
• All forms of investment, deposit and financing instruments comply with Shariah principles and requirements.
• When Investing in IREIT (Islamic real estate investment trust) it should be reviewed by Shariah advisor.

 

Avoids and Prohibitions

Prohibition investing in properties:

Entities primary business related to

• Alcohol, pork, pornography and gambling product.
• Operators of gambling casinos
• Operators of movie theaters
• Insurance companies and conventional banks
• any other prohibited product or service,

 

Prohibition of using any derivatives and instruments involving interest receipts & payments including:

• Future contracts
• Option contracts
• Swaps
• Short sales

 

Avoid

The fund must avoid using leverage using methods prohibited by the Shariah.

Investment in mix activities (permissible and non-permissible) properties:

Properties which have some Non-compliant income. It should be less than 5%. This amount is cleansed out as charity.

Risk management solution

• Must be Islamic, if not available/ viable, can do conventional but with permission from Shariah Advisor.

Takaful /Insurance

• Must be Islamic

 

Shariah Guidelines for Real Estate Marketing:

Ethical Framework for Advertising and Promotion:

• It should not exploit the basic instincts of consumers and should avoid provoking desires that can never be fulfilled.
• It should be based on truth and completely reveal all product attributes.
• It should advocate consumption as a form of worship and promote moderation in the same.
• The platform should be Shariah Compliant.
• Shariah guidelines for Female workers should be followed

 

Islamic Guidelines for Advertising

• Do not propagate wasteful practices or overspending.
• Do not use women or use nudity to gesture sexual appeal in order to lure the audience
• Do not depict celebrities or attractive models as if they use the product when actually they do not.
• Be honest and do not be deceptive or hide any facts that the customer should know
• Don’t use any false assertions, unproven accusations, concoctions, and make-up testimonials.
• Don’t use any false promises which are not intended to be delivered.

 

How Should Islamic Advertising be made?

• In order to impress the audience, especially a Muslim audience the advertisers have to align their strategies with the Islamic injunctions lest to offend them

 

General Prohibited Elements in Advertising

• Haram Products like Wine, Alcohol, Gambling
• Prohibited Material
• Any type of Music and Musical Instrument
• Women
• Showing Satar (Area which is prohibited to show in Islam)
• Prohibited Platforms like Entertainment Channels etc

 

Tips

• Use natural objects like landscape, animals and birds, Avoid using humans. Unless they are absolutely needed, use males
• Modesty and respect should be emphasized. Sexuality, nudity, indulgence, hatred, and racism should not be any part of Islamic advertising Islamic channels should be used
• Use religious terminologies in order to assure the audience of advertisement’s Islamic character. Selected and careful uses of Quranic injunctions create a positive influence over the Muslim audience.
• Advertisements containing any pledges, terms, or promises should contain Bismillah (In the name of Allah)

 

Shariah Guidelines for Digital Advertising

Tv Advertising:

• Should not use any TV channel for its advertisement except religious channels and news channels. Further, sports channel may also be used but not preferable.

Reason:

TV channels like HUM TV etc. are  promoting Anti-Islamic Morals, and sponsor such morals through making Dramas from the compensation they receive from the companies whose advertisements are done on these channels. Therefore, paying such channels for advertisement, falls under assistance in commitment of sin. Hence, not allowed

 

Digital Platform:

• Platforms like Tiktok etc., whose core objective or core use is to promote and sponsor things that are against Islamic Ethics, cannot be used for Marketing and Advertisement. Therefore, it should be ensured that only such social media platforms are used for Marketing and Advertisements that have serious users otherwise the compensation being paid for advertisement will be considered assistance in commitment of sin which is not allowed

 

Print Advertising will include all the advertising which use platforms other than digital. Like

1. Bill Boards
2. Newspaper Advertising
3. Magazine Advertising etc.

 

Other than general guidelines, there are some more guidelines for Print Advertising:

• It is prohibited to print any Human’s face picture
• Any other living object things face picture.

 

Shariah Guidance for Marketing Team

• Marketing Team should take care of
  • Human Rights
  • Road Rights
  • People privacy
• Do not harm any persons self esteem
• Do not waste time on non related matters.
• Don’t misuse company products and assets.

 

Alhamd Shariah Advisory Services Pvt. Ltd