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== DOCUMENT KEY POINTS ==
*islamic banking modes for building financing islamic research and training institute islamic development bank jeddah saudi arabia
*seminar proceedings series no

*functions the functions of the institute are a to organize and coordinate basic and applied research with a view to developing models and methods for the application of shari ah in the field of economics finance and banking b to provide for the training and development of professional personnel in islamic economics to meet the needs of research and shari ah observing agencies c to train personnel engaged in development activities in the bank s member countries d to establish an information center to collect systematize and disseminate information in fields related to its activities and e to undertake any other activities which may advance its purpose
*islamic research and training institute irti establishment of irti the islamic research and training institute was established by the board of executive directors of the islamic development bank idb in h

*islamic research and training institute islamic development bank jeddah saudi arabia islamic banking modes for house building financing proceedings of a workshop organized in khartoum sudan during rabi thani h october g by the islamic research and training institute irti of the islamic development bank idb jeddah and the sudanese estates bank sudan
*edited by mahmoud ahmad mahdi research division seminar proceedings series no

*R islamic research and training institute islamic development bank the views expressed in this book are not necessarily those of the islamic research and training institute nor of the islamic development bank
*first edition h published by islamic research and training institute islamic development bank tel fax tlx isdb sj p

*foreword in pursuance of its responsibility to foster economic development and social progress of its member countries in particular and muslim communities at large through methods and means that conform to islamic shari ah the islamic development bank idb established in h the islamic research and training institute irti
*one of the tasks that have received much consideration of irti is the evolution of modes and instruments that can be used for mobilization and disbursement of financial resources for development in compliance with the teachings of islamic shari ah

*within the conceptual framework outlined by these papers some genuine experiments originating from various islamic countries and muslim communities were also discussed for the sake of facilitating exchange of views and deriving lessons for future course of action
*it is hoped that the publication of these proceedings will induce further fruitful thinking and provide a useful contribution to the sincere efforts exerted for serving the ummah

*bay al thanaya a sale contract involving a pledge from the seller to repay the price and get back the good sold at such and such date or whenever he finds himself able to do so
*glossary of arabic terms bay ajil a sale contract on the basis of deferred payment of the price and present delivery of the good sold

*the seller purchases the goods ordered by the client from a third party and then sells these goods to the client at a price higher than the purchase price payment to be made in future generally in installments
*provider of the capital bears all net loss according to this contract unless there has been violation of the contract terms or neglect from the part of the working partner

*riba usury in the islamic shari ah usury is lending money against interest regardless of whether the rate of interest to be paid is high or low

*as a concept the word takaful is used as a substitute for the term insurance which in a sense involves an element of social security and support
*takaful literally it means mutual support among the members of a society or group of people

*under conditions of multi digit inflation which characterize most of these countries and the consequent inclination of so many people to invest in land and buildings government policy may inevitably be drag ged towards depressing shelter investment
*despite its indubitable significance house financing has neither received so much consideration as a theoretical issue of islamic banking nor could it manage to get its due share as an islamic banking activity

*this notion has consequently led the successive governments of the country to underestimate the indispensable amount of finance that need to be allocated to this sector and hence assign a low priority rank to provision of shelter in their development plans
*when we speak about luxurious housing the demand for which usually originates form the well to do classes of the society it seems that we are defining a commodity that is somewhat different from low cost housing demanded by the poor

*the main objectives of the workshop which comprised three technical papers and seven case studies were to explore the ways and means that are permissible in islamic shari ah for providing finance to the housing sector and to evaluate the experiences of some financial institutions that are already involved in this field
*according to salama conventional banks operating in islamic countries must be losing a considerable part of their potential savings since there are so many muslims who would never invest their money in such banks as long as they deal in riba

*as according to shari ah the bank has to possess the house before selling it to the client the bank will have to register the house in its name first and again the house will be registered in the name of the client after he pays all installments
*he refers in this connection to the problem of hyper inflation and its effects on the cost of housing and discusses the difficulty involved in determination of the rate of return on murabahah and the trade off between fixing a high rate to cater for inflation or a moderate rate that can be tolerated by demanders of low cost housing

*acquiring a house is no doubt a long process which starts from the stage of offer and acceptance between the buyer and the seller payment of the price and authentication of the contract by an authorized advocate and finally approaching the concerned authorities for registration
*it is clear that sharing the extra cost would still involve an additional payment that could possibly set the price of the house sold under this technique less competitive compared to the price of an identical house sold without double registration

*while the client continues to buy more and more shares from the bank the rent payable by the former to the latter declines at the same proportion of share acquisition
*yet due to lack of adequate resources sheikh othmani indicates that most of the islamic states may not be able to secure this need for the needy members of their societies without encountering serious constraints

*it may deserve mentioning here that the difference between this method and the partial instalment sale described above is that in this method decreasing musharakah the financier leases his share in the house to the finance receiver for a rent that keeps declining according to the gradual process of share transfer while in the earlier partial instalment sale method no lease contract is effected between the two parties

*each of these case studies describes the magnitude of the housing problem in the area where the institution presenting the case study operates what methods of house financing are adopted by the institution and what pros and cons that could be distinguished in the context of its experience
*given the huge amount of funds required for solving this problem a strategy that aims at creating an enabling environment to induce private investment in this sector may prove to be more rational than a policy that tempts these

*therefore the participants to the seminar were keen enough to emphasize the painstaking efforts that need to be exerted by muslim scholars research institutions practitioners and policy makers engaged in the fields of islamic banking and finance in order to develop appropriate methods of house financing that are based on the teachings of islamic shari ah
*what still needs to be done is subjecting these techniques to a process of careful scrutiny and refining so as to make them tolerable and appealing to both the financier and the receiver of finance without trespassing on the domain of shari ah restricted dealings

*as the reader will find in more details in the annexes of this volume
*interest free loans etc

*interest finance the goal of a financial institution in an islamic state should take into consideration the goal of achieving the basic needs of the society in that state of which housing is one of a paramount importance
*it also tries to tailor operationally methods of finance that are consistent with islamic shari ah and that could be adopted by financial institutions in islamic countries

*given the rising costs of housing on the one hand and the limitations of most of the above mentioned sources of funds on the other such people may have to wait for years in order to have enough money for building their own houses
*during conditions of inflation islamic methods of financing based on profit sharing may act as a cushion as profits distributed assuming a well managed portfolio may reflect inflation rate better than interest rate and thus enhance mobilization of savings

*when the unit is completed it can either be used by the customer or let in all cases a rent will be determined and the customer can either pay the share of the rent due to the bank and use the premises or the premises can be let out and the rent shared between the bank and the customer as explained earlier
*such short term operations could provide financial institutions with good turn over of capital and secure large profits that compensate operations of direct finance extended to individuals to build houses which in many cases is provided at low rates of return

*iqtina musharakah could also take the form of iqtina where a customer who shares the ownership of the house with the bank pays a regular rent and a regular instalment to his bank simultaneously
*bay ajil a much easier method that could be adopted by islamic financing institutions dealing in housing finance could be by direct selling of housing units on the basis of bay ajil

*on the other hand if the murabahah rate is determined at a rate below the rate of inflation the ability of the financial institution to mitigate the adverse effects of inflation will be negative in real terms and it will not be able to face new commitments
*a small percentage of households who remain better off during inflationary conditions may continue to opt for luxurious housing and thus bid up the cost of building due to increased demand for imported materials as well as demand for funds

*however under decreasing musharakah the rent may have a deterrent impact on a customer who evades repayment as it will remain fixed as long as no repayment of the principal takes place

*lack of institutional facilities a major problem that faces housing finance is that needs in this sector are of a long term nature while resources available to housing finance institutions are in most cases of a short term nature

*direct government finance in theform of large additions to the capital of public institutions operating in this sector or in the form of easy loans or qard hassan extended to such institutions will help in provision of such needs
*housing finance institutions operating according to islamic methods could develop special deposit schemes that may be used either in short term investments or to be tied up to a specific housing scheme i

*in the case of sudan since the establishment of the sudanese estates bank in until the end of the i s direct government finance to this sector took the form of additions to the capital of the bank
*the reason is that in rich countries government surpluses are large while in poor countries government deficits always deter governments from extending large subsidies to housing schemes

*this has resulted in acute shortage of housing which continues to be aggravated by the pressures of ever increasing population of course the labor short and oil rich economies are exceptions
*thirdly and probably most importantly housing is and has been a vehicle of economic development as it generates demand for various basic industries such as steel cement other building materials and fixtures etc

*the emergence of islamic banks in several islamic and in some non muslim countries during the last years and adoption of islamic banking system by iran pakistan and sudan has raised the issue of how interest free finance could be provided to various sectors such as short term trade industry and agriculture
*there is evidence suggesting that modern commercial banking did not make much headway in the muslim countries as it did in the western countries or even in some non muslim asian countries because muslims have reservations about the interest based banking system on religious grounds

*first in the name of the bank at the time of the sale deal between the first seller of the house and the bank and the second time in the name of the final purchaser when the sale deal between the bank second seller and the final purchaser is signed

*is it permissible to attach an imputed value to a residential house how the imputed value shall be arrived at on what basis the rent of the house will be determined if the house has been built through the use of musharakah funds shall the bank be a permanent partner in the house these are some of the questions which need to be answered before musharakah could be used as an important source of housing finance in the islamic countries
*nevertheless one could move in two directions to solve this problem a in those countries where the islamic banking system is being enforced on an economy wide basis a plea can be made to concerned authorities to charge a lower registration fee if the deal is finalized through an islamic bank

*keeping id view the uneven distribution of income large number of poor pressure s of rising population prohibitive costs of land and construction and general shortage of housing particularly in the urban areas the islamic banks housing banks and specialized housing finance institutions should consider evolving the programs of low cost housing

*the islamic banking system has come to realize this fundamental issue as an integral part of its general concern about achieving economic and social well being of musli miss the experience of financing housing through islamic modes is a practice that has come into full being only after the advent of the islamic banking system

*the sudanese estates bank is one of the banks that belong to the public sector and it is specialized in real estate investment
*al baberti al enayah ma fat h al qadir al matba ah al amiriyah al kubra egypt h part p

*briefly speaking the predominant view particularly among the hanafi fuqaha is that although istisna is basically prohibited on the ground that it involves sale of what is still non existent yet it is sanctioned by shari ah as an exceptional case due to the need for it
*if however the sani delivers the article as per specifications agreed upon he will then loose his option to ibn abdin rad al muhtar ala al dur al mukhtar al halabi part p

*in this case one will never tire of hammering on the fact that these institutions in order to provide low cost finance may need to establish relationships with wholesale merchants of materials and purchase from them at whole sale prices so that when the bank s margin of murabahah profit is added to these whole sale prices they will not exceed market prices

*c the sale on the part of the bank and the purchase on the part of the partner of the shares continue so that the bank s shares steadily decrease whereas those of the client increase until all the shares are owned by the latter
*most important techniques of real estates financing especially for clients who wish to acquire building materials to be manufactured by specific producers or in cases where financing covers only part of the operation etc also one of the applications of these two methods of murabahah could be the purchase of ready made houses from or through the concerned institution

*in decreasing musharakah the nominal value of shares is to be fixed so that the interested client who wishes to purchase a certain number of shares will pay only their initial value as paid by the bank irrespective of the rise or fall in the market value of these shares
*in this connection we can refer to what has been indicated by the al barakah bank london in a pamphlet on this subject and which can be summed up as follows objective the program aims at promoting investment in real estates without committing riba

*the two parties agree to sell the real estate in case the client fails to purchase the al baraka s share in it this technique adopted by the al baraka bank is the very technique of decreasing musharakah and it is confined to the procurement of real estate for lodging purposes
*this as we have mentioned before leads to a suspicion of riba since according to this statement the bank will ensure the recovery of the principal as well as

*it would have been more appropriate to leave the value of the share to be determined according to the estate market while taking into account the relationship between the two parties as this is what the concept of absolute participation presupposes
*the proof for permissibility of qard in shari ah can be found in the holy verse ye who believe when ye deal with each other in transactions involving future obligations in a fixed period of time reduce them to writing

*some fuqaha have gone to the extent of not only forbidding the lender from stipulating interest beforehand but also emphasizing that he should not accept a present or a favor in return for the loan unless such a conduct has long been operative between the borrower and the lender
*whoever relieves a muslim from the strain of a calamity in this life of here says our prophet pbuh god will relieve him from one of the calamities of doomsday

*however if these fees exceed the actual cost of administering the loan ie if they result in a revenue over and above the actual cost this is riba in the strict sense and hence it is prohibited
*regarding uses of the qard although estate banks usually extend finance as a means of making profit and hence building a resource base that will enable them to expand their activities to a large group of beneficiaries yet consideration may need to be made to some exceptional cases

*in the first type the manufacturing materials are provided by the mustasni and that is ijarah while in the second the sani provides the materials and manufactures a well defined article and this is istisna

*it is also permissible to mention both prices at the time of effecting the contract yet the deal should not be concluded before the two parties agree on a specific price and the way it is going to be paid
*in case a purchaser debtor fails to pay due installments on time he should not be forced to make extra payment as compensation whether according to prior agreement or not because forcing him to do so causes the transaction to become riba

*adopted by the al baraka london the author says if anything can be taken against this technique it is the statement in paragraph namely the value of the share should remain fixed throughout the period of the contract this as we have mentioned before leads to a suspicion of riba
*this fixation takes place in the form of a sale process whereby the buyer makes an offer within a certain time frame and according to a certain price cost price ie tawliyah sale while the seller retains the right to accept the offer whenever he so wishes

*c when the client fails to buy the banks share and the house is sold to a third party the bank will first recover its own funds advanced for purchasing the house before allowing the client to take his share

*fees exceeding actual loan servicing expenses are dealt with in the resolution of the fiqh academy as follows the method adopted by real estates housing and other similar banks of charging interest on loans be it small or large is not permissible according to shari ah because it is riba

*however it may be more accurate to say that it is a sort of takaful rather than social security because loans in islam are voluntary donations while social security has become one of the functions which a state has to provide through welfare schemes that benefit civil servants and other groups in the society at the time of retirement

*methods of house building financing according to shari ah mohammad taqi al othmani in the name of god most gracious most merciful praise be to almighty god and peace and blessings be on our lord muhammad the trustworthy prophet and on his sanctified companions and on all those who follow them faithfully up to the day of judgement
*the procurement of an appropriate spacious home in the world of today has become the forefront of man s problems especially in crowded cities because of the complexities of life overpopulation and the high cost of living

*it is thus incumbent upon the muslim ulama to propose to the people methods of real estate financing which do not contradict with the rulings of shari ah and can replace interest based financing
*this would be secured either from the zakah fund if he deserves zakah or the state should sell him the house at cost price without any profit or give him an interest free loan

*if however the client can provide part of the cost of the house and he wants the financier to provide the remaining part which is the prevalent situation in most cases nowadays then he can own part of the house
*this deferred sale contract can be concluded without specifying the profit margin in which case the whole value of the house will be paid in installments without specifying in the contract how much of this value represents the cost and how much represents the profit margin

*if the land is the property of the client or has become his through this arrangement and the client requires financing to build the house on his land then the financier and the client can build the house jointly
*ibn abidin says in this respect in rad al muhtar if one of the two partners in the building sells his share to a third party it is not permissible while it is permissible for him to sell it to his partner

*ibn abidin also said in this respect as in jami al fusulayn if the two parties mention sale without conditions and then mention the condition in the form of verbal agreement the sale is permissible and the pledge should be honored as honoring pledges might be necessary for the benefit of the people according to these juristic texts such a pledge can be considered legally binding
*if the two parties concluded the sale without stipulating a condition to this effect and then such a condition is mentioned as a promise the sale contract thus concluded is permissible while the promise is also binding as it ensures making a just deal

*so if the portion of the financier is worth rupees for example the value of each of the ten shares will be rupees and therefore at the end of every six months the client buys a share for this amount
*when each pays half the price the house is shared equally between them when one of the partners pays a third and the other the two thirds then it is owned by them each according to what he has paid

*however if the seller owns a share in the building only the general consensus of the fuqaha supports the validity of selling to his partner although there is controversy about his selling to a third party
*it is thus clear that each of these three contracts viz musharakah leasing and sale contracts is sound on its own rights if each one of these contracts is concluded without being conditional on the other

*however if the sale is made without this condition then the buyer promises the seller that he shall sell back the good to him if he pays back the price the pledge is sound and binding to the seller according to al hattab who says in his book entitled w i n al reported by al tirmithi shams al din ibn qudamah al sharh al kabir part p
*al tirmithi said that this is a correct hadith and the prophet pbuh has forbidden concluding two sales in one deal and this practice amounts to the same ahmad said the same holds true for all that falls under the same meaning as when one party says to the other provided that you give me your daughter to marry or that i give you my daughter to marry that is not acceptable

*in this the judge ibn samarach a hanafi fuqeeh says if an imperfect condition is made by the two parties prior to the contract then the contract followed the contract is valid but if the two matters happen simultaneously the contract becomes invalid
*ibn abidin has also reported this in his book rad al muhtar in which he says as stated in jami al fusulain if an imperfect condition is made prior to the contract and then the contract is concluded it is valid

*my answer as regards this ambiguity is that the distinction between these two cases is not only in what each of them appears to be but there is a fine distinction in the essence of each case as well for if a contract is conditional upon another a case which is termed as a deal within a deal it is not a definitive contract but dependent on the other

*thus a sale which is conditional upon another contract remains hesitant between completion and rescission and this hesitancy breeds its imperfection on the other hand a definitive sale preceded by a pledge is inviolable as to the definiteness of the sale but it is nevertheless completed on the understanding that the pledge preceding the sale should be binding to the buyer according to those who claim that a pledge is binding
*then the financier would lease out to the client for a specific rent then the client buys the share of the financier in a number of installments until he owns the entire house

*such an agreement is only a pledge between the two parties to make up such contracts but they shall not be made except when they are due and with the mutual consent of both parties
*thus the contract would be definitive and free of all conditions

*the development of the housing sector in jordan the housing sector is directly affected by the customary demographic changes which occur as a result of the natural growth of the population and changes in standards of living
*the economic aspect of this issue is not confined only to allocation of part of the available resources to construction nor to calculations of costs of and preference between the various kinds of materials used in construction

*as for the era of the seventies and beginning of eighties which has witnessed the oil boom jordan represented the source country of intensive labor migration and the arab states of the gulf represented the recipient countries
*however this bank did not confine its activities to financing house building projects only as it may be understood from its name but it began to assume all the customary banking transactions exactly as any other ordinary bank while maintaining its main activity in the field of financing housing projects

*a house building corporations these include public and private corporations which undertake the construction of collective or individual residential premises with the aim of selling them whether for profit or not and they include governmental housing corporations such as the housing corporation and the urban development department
*b housing finance corporations these are institutions which provide finance to collective or individual housing projects whether for earning profit or not and they include specialized housing corporations the housing bank

*establishment of jordan islamic bank and its activities incorporation of the bank the jordan islamic bank for finance and investment was founded under a special act issued in and was registered as a public joint stock company in with an initial capital of four million dinars which was increased to six million dinars in and
*in general the housing sector has been able so far and within its above mentioned composition and setup to maintain a balance between supply and demand in this sector and even achieve a surplus in supply sometimes especially in the sector of luxurious housing allocated to highincome

*banking operations the bank undertakes all aspects of customary or newly introduced banking activities within the scope of its prescribed commitment to the rulings and teachings of the tolerant islamic shari ah
*there include addressing economic and social needs in the field of banking services and undertaking transactions of financing and investment according to the teachings and rulings of islamic shari ah which prohibit riba

*joint investment accounts these are the accounts in which the bank accepts deposits froth those wishing to participate with it in the financing and investment operations which it undertakes on the basis of joint mudarabah in return for part of the profits which accrue in the relevant fiscal year
*the bank keeps separate accounts of all the revenues and expenses of these projects apart from all the other revenues and expenses of the joint investment which the bank undertakes

*financing and investment operations the bank s law stipulates that it may undertake all riba free financing and investment operations through the means which fulfil its objectives including a provision of necessary financing wholly or partially in all operations that are subject to self liquidation including forms of financing by mudarabah murabahah lil a mir bil shira musharakah and all other similar for miss b utilization of the funds whose owners desire to invest them jointly with other resources to be provided by the bank in accordance with the system of joint mudarabah besides investments made under any other special agreement
*achievements of the bank the bank has succeeded in accomplishing so many objectives in various fields including provision of large scale services to encompass the different regions of the kingdom throughout its branch network which so far comprises branches and three offices

*these techniques include first murabahah lil amr bil shim according to this technique the bank endeavors to fulfil the request of the client by purchasing what the client requests subject to commitment on the part of the client to purchase what he ordered and as per the method of determination of profit and repayment mutually agreed upon on commencement of the operation
*competition within one group of institutions whose activities are based on similar rules means and fundamentals that distinguish them from other groups such as islamic institutions on the one hand and non islamic institutions on the other

*as regards the murabahah profit which the bank receives on this kind of financing it differs according to the period and method of repayment monthly annual etc and the period of grace if any and as per the rate of return desired by the bank

*the relationship between the bank and the client is a partnership which does not entitle the bank to have recourse to the other sources of income of the client for recovery of the principal offered by the former in case of failure of the project to achieve the expected income wholly or partially
*however its practical application has been limited at most times to the sector of construction by virtue of its clear nature and easiness of administering its projects and exercising administrative and financial control on them

*the bank assumes with authorization from the client the responsibility of managing the project and the revenue generated therefrom is divided between the bank and the client as follows a of the revenue to be allocated as the bank s share
*the number of projects financed by the jordan islamic bank through this method reached about projects in in the different regions of the kingdom of jordan on a total area of about thousand square meters

*the housing project of al rawdhah suburb the bank undertook the execution and administration of this housing project on musharakah basis with a number of investors with the object of availing the citizens with the opportunity of owning suitable residence on the one hand and helping the investors achieve reasonable profit on the other
*the project contains seven residential buildings comprising apartments at areas ranging between m and thirty independent housing units villas at areas ranging between m and a modern shopping centre composed of shops at areas ranging between

*methods of sale and marketing policy at the outset of its marketing campaign the bank adopted the following three methods of sale cash sale as the purchaser pays the price in full in cash on purchase the bank promptly transfers the ownership of the unit to the purchaser
*lease ending with ownership this method is based on leasing the residential unit to the client for a monthly rent for thirty years at the end of which the bank assigns the ownership of this unit to the lessee without return on condition that he pays the rent of the first year in advance

*fourth direct investment the bank does not adopt the method of direct investment in the sector of real estates in the case of residential buildings only but also in the case of commercial buildings
*it is note worthy that the government has given on its part a facility to the collective housing projects financed by banks as it exempted the residential units of these projects from the registration fees if the total area of the unit is less than

*sale and lease of housing units type of the unit area m sale arrangements closed open total instalment sale lease ownership minimum monthly installments minimum monthly rent for subsequent years advance rent for payment years years years year yrs
*large villa small villa large flat medium flat below medium at small flat

*constraints and obstacles of financing housing projects islamic financing institutions encounter a set of legal and financial obstacles which jeopardize their expansion in financing housing projects

*financial obstacles these are the obstacles relating to supply of and demand for funds such as the ability of the bank to control and monitor its cash flows by making trade off between the terms of maturity of the funds invested in financing housing projects which are usually of a long term nature and the terms of deposits with the bank which are mostly of short and medium term nature
*had the tax law exempted the revenues the bank generates from housing finance from the income tax wholly or partially the bank would have expanded its operations in this field while at the same time this exemption would have been positively reflected on the beneficiaries as well

*for the year and whereas the second party reviewed the design plans and technical specifications of the building as well as any modifications related to it and approved them all and has thus exploited his right to any objection to the design plans sketches or technical specifications regardless of the reasons of his objection and whereas the second party desires and accepts to purchase the residential unit no
*a a a a a a a a a a a a a a a a in the city ofa a a a a and whereas the first party constructed a real estate project on the above mentioned plot of land for selling it on the basis of the law of ownership of multistory buildings and flats no

*the balance of the agreed upon price of the sold property in the amount of dinars in addition to the expenses which the first party has actually borne in connection with implementation of this contract is considered a debt owed to the first party by the second party and or the third party as being a guarantor
*and whereas the second party has no right to change or modify the sold property specified in this contract or its agreed upon conditions except with a written approval from the first party and as then the first contract shall be considered annulled and a new contract needs to be effected and whereas the third party has accepted to provide to the second party an absolute joint guarantee that continues in effect till full repayment

*the first party may on the basis of this authorization request from the employer of the second party and or third party to withhold the value of the installment from the income of the second party and or third party and transfer it to the first party in repayment of the said debt
*c the date of maturity of the first installment is the beginning of the month of in the year and each of the remaining installments shall fall due at the beginning of every following month

*the second party shall be committed to place the sold property as guarantee for the debt under this contract on undertaking the cession by mortgaging it in favor of the first party and to pay all the fees and dues resulting from the mortgage operation with the concerned department
*objects while holding the second party liable for any damage failure or any other rights however serious they are without the need for a pre notice procedure and the first party shall be taken for his word without an oath

*in case of payment of any indemnities arising from and or related to the death of the second party or damages in the insured properties or from acquisition of part of the properties placed in lien to the debt and or for any other reason the first party shall be entitled to receive all the compensations in order to settle the balance of the debt or any other commitments required from the second party to the first party
*the second party shall be committed if the first party so requests in writing to participate in the mutual insurance and self insurance funds which the first party has established for this purpose or to make insurance at any insurance company operating according to the rules of islamic shari ah and approved by the first party for this purpose

*the second party shall have the right to use the part he owns in the building independently in the building as he may also use the above described common parts for the purposes for which they are made in compliance with the public order and common interest and in a manner that may not prevent the other partners from using their rights
*d the ceilings pivots vaults entrances staircases and its enclosures corridors hallways elevators and the porters roo miss e the heating and cooling systems and all kinds of pipes water mains spouts sewage pipes common installations fittings and extensions of electricity and water and their accessories except these inside the sold property

*the second party and or third party acknowledge that the first party is trustworthy and taken for his word without an oath concerning the implementation of this contract and that his books and accounts are considered final evidence for proving any amounts arising from and or relating to this contract and its applications whatever it is and that all the entries and accounts of the first party are considered final and correct and that the second party has no right to object to them in any way

*if dispute arises in application of this contract and or in relation to it the first party may refer the dispute to a board of three arbitrators to be selected as follows an arbitrator to be selected by the first party
*it is understood that a solvent debtor is a person who owns movable or immovable property that neither islamic shari ah nor the laws and systems in force prevent disposing of it whether such property is mortgaged or not and if such property is sufficient to repay who or partially the obligations and commitments

*b signing before the concerned legal authority the system of administration of the building and the contract of the owner s society in accordance with the legal provisions and conditions stipulated in the law of ownership of multistory buildings and flats no
*the second and third parties authorize the first party to enter any installments or charges or amounts which fall due under this contract in the accounts of the second and or third party opened with the first party and that the mere signing on this contract is sufficient to make such authorization effective

*the first party is committed to undertake after the second party fulfills all the conditions of this contract to register the above mentioned leased unit in the name of the second party at the end of the lease period
*the cost of the heating station which includes the costs of operation maintenance fuel electricity water and the cost of depreciation of this station as a result of operation and or lapse of time and or any other reason which necessitates replacing it with

*the first party may undertake any constructions alterations renovations or repairs of any kind or nature it deems suitable in the building without the objection of the second party and or his successors to this in any way provided this does not affect the second party s right of using the leased unit
*the second party shall be committed to a pay all the amounts required from him on their dates of maturity or any other necessary amounts required from him without delay together with all due fees taxes levies and expenses and to take all the necessary measures for effectuating such payments

*the first party shall be entitled to transfer wholly or partially all its rights under this contract and its annexes to any other party at any time without the need to obtain the approval of the second party and or third party and without the need for the first party to serve pre notice or warning to the second party

*in case of payment of any indemnities arising from and or relating to the death of the second party or resulting from the occurrence of damage in the insured properties or from acquisition or taking possession of part of the properties placed in lien to the debt and or for any other reason the first party shall be entitled to receive and cash all the compensations in repayment of the balance of the debt or any other commitments required from the second party to the first party
*the first party shall have the right to consider all the amounts due on the second party to it under this contract payable after serving written notice on the second and or third party therewith and shall also have the right to consider this contract terminated with all the rights arising therefrom automatically without the need to serve a legal court notice or to resort to courts in the following cases a breach of the second and or third party of the provisions of this contract and or any item of it

*g if any penalty or procedure to execute a court judgement or lien for repayment of debt is sanctioned upon the second and or third party or a liquidator or a custodian is appointed on all or part of the properties of the second and or third party as a result of claim for liquidation
*in case the first party considers this contract canceled automatically without the need to serve a legal notice or the like or to resort to courts then the first party may claim the actual loss it sustained from the second party together with all the incurred and expected expenses

*the second and or the third party acknowledge that in case of his their failure to fulfil any of their commitments to the first party after its maturity and despite their solvency and ability to do so the first party may claim the loss it sustains as a result of and or in relation to the event of their failure to pay even during the period of delay
*the second and or third party acknowledge that the first party is trustworthy and taken for his word without an oath concerning implementation of this contract and that his books and accounts are considered a sufficient evidence for proving any amounts arising from and or relating to this contract and its applications

*the second party shall be committed to abide by all the provisions of the law of ownership of multistory buildings and flats and to sign at the concerned department any regulations relating to administration of the common parts of the building or any other part registered under this
*the third party guarantees the second party under this contract by providing a continuous joint surety till maturity and then an absolute surety and guarantee without any reservation for full repayment of the debt and its related charges as per the terms and conditions agreed upon

*failure to fulfil this request shall make the second party liable for delay and consequently the first party may refuse to register the sold property in the name of the second party unless all the documents required for completing the file are available at the disposal of the first party
*corridors hallways elevators and the porter s roo miss e the heating and cooling systems and all kinds of pipes water mains spouts sewage pipes common installations fittings and extensions of electricity and water and their accessories except those inside the leased unit

*this contract shall be considered effective and binding to the undersigned parties and each party forfeits his right to claim the falseness of the declarations and or the conditions which surrounded the formulation of the contract and or raise any subjective or objective plea against the contents
*the second and third parties authorize the first party to debit their accounts with any installments or charges or amounts which fall due under this contract and the mere signing of this contract by the second and the third parties is sufficient to make the first party authorized to make such cntries

*b the second party shall bear all the legal fees and duties due on transfer of ownership whether those of the first or the second party
*residential unit he owns and in accordance with the arrangement in force under the contracts of lease ending with ownership or the contracts of installment sale precedent to this contract

*with the advent of the eighties and as a result of the increasing demand for new housing units the british government was forced to allow the expansion and widening of the green belt in order to increase the land area on which houses could be built

*analysts consider that prices have reached a realistic level and expect that they will show a stable rate of growth in the coming two years parallel to the annual rate of growth of incomes
*to curb down the rate of inflation and the trade deficit by trying to depress consumer spending and control imports of commodities the government raised interest rates on sterling deposits

*role of the government and financial institutions the british government has played an important and positive role in activating and expanding the housing sector by providing many incentives and tax exemptions to those interested in this sector
*the following table shows the average price of a housing unit from the seventies onward which has been sliced out to indicate the average price per economic housing unit throughout britain

*to respond to the wishes of muslims we had to carry out research and studies in order to find a suitable financing method for those wanting to buy houses that would be in line with the principles of the islamic shari ah and which at the same time would not contradict with the british laws or affect the advantages and benefits offered by the government to small owners

*the rest of the price including the profit of the bank is paid by the client according to the agreement reached with the bank either upon completion of the modifications and sale of the units or in monthly or quarterly payments
*murabahah murabahah is suitable for short or medium term business operations with a time span not exceeding two years and is more suitable for responding to the needs of small contractors who want to buy the land build and immediately sell the premises

*after studying the project and if the bank is convinced of the possibility of its success a real estate expert visits the site and presents his opinion about the project and the expected sale price of the units after completion of the project
*the client must open an account with the bank and it is always preferable that he be an old client of the bank so that the bank may be acquainted with the volume of his work

*the bank agrees with the client on the division of profits after deducting all expenses including the salary of the client for management
*applications for musharakah financing are studied carefully including the economic feasibility study and cost schedules lists of the materials and equipment necessary for the project schedules of financial flows and estimated profits and losses

*the regulations of the company specify the role of each partner in the financing management duties and rights as well as the division of profits and bearing of the losses the period of the company and the bases upon which the partners can buy each other s shares
*the bank presented in this context the islamic trust funding agreement based on decreasing musharakah with the client while the bank retains the right to rent its part to the client

*since the client is the user and beneficiary from the property throughout the contract period he pays for this privilege user s fees estimated in accordance with the percentage of the bank s ownership in the property
*and the bank shares in it are calculated as follows r fees for annual use of the property k total number of shares s ratio of financing in real estate markets h bank s share in user s fees q shares owned by the bank n number of annual installments

*example if there is an agreement to buy a unit for stg and the bank finances stg for years on the basis of average ratio of financing in the real estate market amounting to with payments in monthly installments the calculation is as follows installments bank shares shares total number of shares level of financing user s fee r x stg
*the bank allows the client to buy a smaller number in the first few years increasing gradually while the rent decreases

*ce the previous step is undertaken and a decision is made by the bank offer the finance requested the bank sends its approval to the client in ting
*ure adopted and general conditions e client has to complete a special form and present the specifications of property he intends to buy as well as the documents pertaining to his dual income

*the bank s ownership share at the time of signing the contract should not exceed of the purchase or assessment value whichever is lower in the case of non residential units or in the case of residential
*a the client accepts by signing the offer and returning it back to the bank whereupon the bank names an assessor who makes a comprehensive survey and sends his report to the client

*the price of bought shares is deducted monthly or quarterly as well as the bank s share in the user s fees from the account of the client with the bank by a standing order given by the client
*compared to other banks it was a very short period for the bank to build sufficient experience in dealing with these proble miss this is in addition to the fact that the bank operates in a country which does not recognize islamic shari ah

*however if the reasons for non payment are inevitable such as fluctuations in the prices in the real estate market in the case of selling by murabahah the bank might consider changing the operation from murabahah to long term musharakah renting out the property and using the rent revenue to pay back the shares of the bank
*to avoid double payment of this fee especially in murabahah operations which require that the bank buys and registers the property in its name first and then sells it to the client who registers it in his name in turn while maintaining as guarantee the ownership deed by the bank the advisory committee allowed effecting a mandate directly to the bank to act on behalf of the client

*again how do we consider the rental value on the basis of an unfurnished or a furnished unit in estimating the rental value should we consider the best way of profiting from the property such as renting it as separate rooms rather than one house or renting it to a company rather than a family the rent also depends on the type of furniture and equipment in the property
*the percentage of real estate financing as an indicator of defining user s fee this issue was the subject to a great deal of study discussion and research in order to l reach an indicator that is stable clear and known to all parties to define the bank s share in user s fee

*in the light of all these factors and in order to find a suitable method of defining user s fees the bank decided to ask knowledgeable ulama about using the same financing indicators which are used to define the profits of murabahah operations commodities and agricultural products dealings for defining the bank s user s fees in lieu of its share in the ownership of the property
*as regards long term real estate financing under decreasing musharakah and due to the fact that depositors are reluctant to leave their deposits for long periods extending to years without being able to withdraw sums for their living expenses the bank tends to depend on capital and savings accounts

*at any rate the decision on the amount of finance to be given depends on the capacity of the client to pay back without facing any financial hardship
*a monthly price is set and announced depending on the real value of the property bought or financed by the investment portfolio created for that purpose with profit coupons payable annually

*with the expected increase in paid capital from stg million in to stg million and us million in and the registered growth in deposits from stg million at the end of to stg million at the end of the bank expects to raise the ceiling it places on real estate investments in future as the bank has reached the maximum limit under present ceilings
*the owner of the apartment has no right to the land the land on which the apartment is built remains the property of the original land owner

*this could be similar to the system operating in britain so that with the help of allah we can provide peace of mind and financial stability as well as security for the muslim citizen whom we all serve
*god s peace and blessings be upon you

*islamic banking methods for house building financing a case study of india rahmatullah abdul ahad introduction house building financing is one of the most important fields where social as well as commercial banks can play a significant role

*on the feedback of approximately per cent institutions regarding their mode of operation it has been found that except few all are performing the functions of a charitable society and therefore their basic and major function is advancement of qard hassan
*housing schemes to provide shelter to medium income group mig and low income group lig have been undertaken by different state governments with the assistance of the

*the absence of any concerted effort on their part may be due to lack of perception and dearth of data on the gravity of the housing problem of muslim india besides lethargy lack of ce and lack of finance and lack of professional and technical skill etc
*once the allotment is made the applicant is required to pay approximately per cent of the total cost at the time of possession

*furthermore the priority of housing loans seems to have declined further and further as the share of housing loans in the total working capital as well as in the total loans advanced has been diminishing through time
*however such borrowers were required to buy shares of certain minimum amount which amounts proximately to per cent of the value of the loans amounting to rs

*the amount of rent will continue to decline in successive years as the borrower pays instalment of the loan monthly yearly at the rate of approximately per cent of the capital borrowed ie within seven years

*the managers of the institution feel that this permission and its optimum use will prove to be a landmark in the growth of the islamic banking system in india
*it has a similar nature and mode of operation as that of bait un nasr cooperative credit society discussed earlier the major function of the set up is confined to social banking

*in case of non acceptance of the explanation the borrower is served with a legal notice to adhere to the terms of agreement and pay the due amount within a specified period
*borrowers are asked to repay the entire loan in equal monthly installments as per schedule agreed by and between the borrower and the society

*compared to average growth rate of commercial banks which works out to be to per cent the vertical growth of both the institutions aicmeu s and bait un nas r is recorded at a compound rate of approximately per cent p
*thirdly aific also seems to give less priority to housing finance as return on investment in housing is lower in comparison to other fields

*for later buildings rents get effectively more frozen to protect the tenants and make it almost impossible to enforce lease terms on the duration of rentals
*the floor space index fsi criteria makes cost of dwellings out of large proportions of the low income group people

*such an approach needs change of the emphasis from mere prescription of qualitative housing beyond the capacity of general people to the provision of facilities and conditions that enable the community to obtain more and better houses relating to their needs and abilities

*if the creditor agrees to accept the loan by installments as aforesaid and in such event if the borrower commits default in payment of any of the said installments then it shall be at the option of the creditor to make the entire balance or the amount of the loan then outstanding due and payable at once and the creditor shall be entitled to enforce the securities created in its favor for recovery of the amount of the outstanding loan together with
*c other documents as may be required by the creditor the documents contemplated under the sanction advice from the creditor to the borrower contained in the letter of the creditor dated bearing ref

*the borrower hereby agrees and undertakes that so long as the said amount of the loan or any part thereof remains outstanding to the creditor the borrower will not dispose of the said flat shop without the written consent of the creditor and the borrower will also not let sub let or give on leave and license basis or otherwise hand over or part with possession of the said flat and create any third party interest in it in any manner whatsoever
*the borrower represents and warrants that i the information furnished by the borrower to the bank from time to time is factually true and correct and is deemed to constitute a part of the representations on the basis of which the creditor has sanctioned the loan amount

*the borrower will produce and hand over to the creditor the original registration receipt for having lodged the said agreement for sale for registration and at the same time of the disbursement of the loan the borrower will hand over to creditor a letter addressed to the sub registrar of assurances directing the sub registrar to deliver the agreement for sale duly registered to the creditor and not to him after due registration

*the borrower hereby agrees to make a declaration in the matter of the said loan in the form prepared by the creditor with such additions and alterations therein as the creditor may think fit and the undertaking of the borrower contained in the said declaration as regards the intimation and other things to be done in the event of any acquisition proceedings being started or commended by the income tax authorities under the provisions of section a b of the said act and such declaration shall be deemed to be incorporated in this agreement and shall form part of these presents
*in the event of the society or other incorporated body being registered and the borrower being a member of such society or other incorporated body and the flat shop is situated in a building belonging to the society or other incorporated body then the borrower will follow strictly the procedure prescribed by the creditor for creating a security in its favor

*b upon failure of the borrower to carry out or upon breach by the borrower of any of the terms conditions or covenants of this agreement or of any undertaking agreement of obligations with the creditor or on any security documents deed or instrument executed by the borrower in favor of the creditor
*c if the borrower shall take or permit to be taken or suffer any action or proceedings whereby the flat shop shall or may be assigned attached or in any manner transferred or delivered to any receiver assigned liquidator or other person whether appointed by the borrower or by any court of law tribunal government body or other person authorized by law

*in the event of the borrower committing default in observance and performance of the terms and conditions of these presents or in the event of the borrower committing default in payment of the amount of the loan and interest in the manner agreed upon then and in any of such events the bank shall be entitled to enforce the securities created in favor of the creditor by all methods according to law and without prejudice to the aforesaid remedies the creditor shall be entitled to sell off or cause to be sold off the said flat shop

*road bombay deed of guarantee registered under the maharashtra state cooperative societies act registered office r
*st floor vazir building ibrahim rahmatullah road bombay from

*rupees to hereinafter referred to as the principal debtor we the undersigned and hereinafter referred to as the sureties

*it is also agreed that any admission or acknowledgement in written form by the principal debtor in relation to the said advance loan and or in relation to the subject matter of this guarantee and or any judgement or award obtained by y o u against the principal debtor shall be binding on us and we accept the corrections of any statement of account served on the principal debtor which is certified by an office bearer of the creditor and the same shall be binding and conclusive as against us and we further agree that in making an acknowledgement or making a payment the principal debtor shall be treated as our duly authorized agent for purposes of limitation act
*d to us at the address to which it is required to be despatched by this clause shall be deemed to have been duly served on us at the time when the notice would be in the ordinary course of post notwithstanding that the notice may not in fact have been delivered to us or that the address to which it is despatched may have ceased to be our address

*we agree that the entries in the book of accounts maintained in the ordinary course of the activities of the creditor with regard to the advance loan made or given to the principal debtor and with regard to costs charges and expenses debited to the principal debtor shall be conclusive evidence against us of the transaction and matters therein appearing and of the liability of the principal debtor for the sums shown to be due by such entries
*we hereby consent to your making any variance that you may think fit in the terms of your contract with the principal debtor by determining enlarging or varying any credit to the principal debtor and or by making any composition with the principal debtor and or by promising to give time to the principal debtor and or not using the principal debtor and or by parting with any security which you may hold for the guaranteed debt

*creditor the legal consequences of which may be to discharge the principal debtor and or by any act of the creditor which would but for this present provision be inconsistent with our right as sureties and or by the commission of the creditor to do any act which but for this present provision be the duty of the creditor to us would have required the creditor to do
*we declare that this guarantee is in addition to and not by way of limitation of or substitution for any other guarantee or guarantees that we may have previously given or may hereafter give to the creditor whether alone or jointly with any other parties and that this guarantee shall not revoke or limit any such other guarantee or guarantees

*aicmeu s baitul mal cooperative mortgagee credit society limited and in the matter j of loan advance of mortgage debt
*b by hand delivery to sir sub equitable mortgage mortgage by deposit of title deeds

*i residing at and i the deponents above named do hereby state on solemn affirmation as under i we do hereby declare that i we have this day deposited the original agreement for sale and other documents of title in respect of the property described hereinabove with you by way of an equitable mortgage with intent to create a charge therein for securing the repayment to you on demand the sum of rs
*i we hereby undertake as and when required by you to execute and register mortgage in such form and containing such covenants and provisions as you deem fit and proper

*identified by me
*before me

*unfortunately for the last years muslims in this part of the world have been facing this challenge either to buy a house and indulge in interest or forget about buying a housing unit altogether
*yet others although well settled economically still hold the view that no matter why indulging in riba is forbidden by god the almighty

*therefore this project provides us with an opportunity to invest our savings for any period of time and earn halal income in the form of dividends the gist of three important legislations have been combined to form the basic foundation of this project
*is to provide an opportunity to its members who are committed not to indulge themselves in riba for buying a house for their family with security and as much flexibility as possible within the taxation and legal framework of canada

*moreover such investments will not be attached to a particular house so as to keep an individual s funds as flexible as possible and the investors will have the right to redeem their investment with a reasonable notice and share in the capital gain or loss and the rental income of the co operative in the form of dividends
*member s investment in the housing co operative shares is very secure since legal titles of all housing units remain with the housing co operative until all of the required shares are accumulated by the home buyers members

*any person who purchases the common shares of the corporation becomes a member of the corporation in the sense that he participates in the profit and loss of the corporation
*investment could also be started by the members on behalf of their children so that they will be in a position to buy their houses easily after they get married

*the last share of the house to be purchased by the member is a preferred share of class g the price of which shall be determined bythe board to reflect of the difference between the cost and the fair market value
*any member of the corporation in his individual capacity can purchase a house in partnership with the corporation whereby the house is shared by the member and the corporation each in proportion of his respective investment in that house

*houses purchased by the islamic cooperative housing corporation for its members year housing units cumulative purchased during the first three years the nature of housing units purchased financed was low to medium cost
*with the exception of a few units which are condominium townhouses jointly owned by housing complex residents great majority of the housing units are detached single dwelling houses

*membership similarly our membership grew very slowly in the early years and progressed as follows table no
*growth of membership of the islamic cooperative housing corporation year new membership cumulative

*the duration of financing is flexible within the limits of years and is dependent upon the amount financed by the co op
*retirement saving plan and business investments project another project has been launched to attract tax deductible retirement saving funds which are presently deposited in riba based institutions

*we have then received the government s approval to increase our authorized capital from million to million
*revenue and expenses the total income and expenses for the last eight years are shown in table

*total income expenses of the islamic cooperative housing corporation canadian dollars year total expenses income patronage dividend the co operative declared patronage dividend for the last years as follows
*table no

*the remaining of the income is distributed as dividend to the members shareholders in the ratio of their quarterly shareholdings as of end of march june september and december of each year

*c the application called occupancy statement will provide detailed and up to date information pertaining to the present residential status ie type of housing unit monthly rent mortgage payments balance of first and second mortgages with due dates names of mortgage companies landlord management company type of desired housing unit choice of location approximate price range and number of shares the
*b when necessary funds are available notice will be sent to members in list a and list b and applications will be invited from eligible members who are interested in acquiring a house through the co op at that time

*d i qualified members list a all complete and eligible occupancy statements will be reviewed by the board of directors and based on the length of membership accumulation of shares minimum of which will be equivalent to of the first and of the difference between and the cost of the house up to
*co op s maximum contribution will be for any house and other necessary considerations three qualified members will be selected in order of preference and they will be given the permission to locate negotiate and put an offer on the desired housing unit

*g i as a result of a transfer sale of a housing unit any gain or loss realized after deducting the cost of authorized major improvements and expansions and certain legal expenses will be divided as follows to the member and to the co op if at that time member had accumulated shares equivalent to more than of the cost of the housing unit to the member and to the co op if member had accumulated shares of the cost of the house or less
*f if no member interested in that housing unit is found or if no member can take over that housing unit within the stipulated time then the owner member will be given the permission to arrange the sale of that housing unit to outsiders

*f negligence breach of agreement any member found negligent and or in breach of occupancy agreement could be asked to vacate the housing unit and he may be suspended from the membership
*major improvements and expansions a member may undertake major improvements and or expansions in the housing unit after getting the approval from the board of directors

*i a co operative incorporated under the laws of ontario hereinafter referred to as co operative of the first part and members occupants of cooperative hereinafter referred to as members occupants of the second part whereas co operative is a corporation having its objects as follows a
*to buy own sell improve manage construct or lease and operate land and buildings for the purpose of providing residential accommodation to its members who will occupy housing units otherwise than as owners d

*and whereas members occupants have been certified by cooperative to be qualified to participate in the benefits under the articles of incorporation by laws and regulations passed there under and where pursuant to co operative scheme of co operative it has acquired the land hereinafter more particularly described as in the city of province of ontario registered as parcel section in the land titles division of at
*now this agreement witnesseth that in consideration of the conditions provisions and mutual covenants contained herein and the sum of dollars and other good and valuable consideration paid by co operative to members occupants the receipt of which is hereby acknowledged by the members occupants the members occupants agree to occupy the said lands and premises as hereinbefore described

*the members occupants agree that save with the approval of the cooperative during the continuance of this occupancy agreement no building or buildings booth or structure of any kind whatsoever shall be erected on the premises or additions or alterations made to existing buildings

*b the members occupants agree that it will be their sole responsibility for any loss or damage to the said property caused by their negligence or caused by the negligence of their employees agents guests visitors and licensees etc

*members occupants acknowledge that the payment of occupancy cost rent by them to the co operative shall not be considered any subscription by them towards the purchase of shares in the co operative
*in witness whereof the said parties have hereinto set their respective hands and seals

*given the huge size of this gap and the emergence of an unhealthy housing structure it is now a commonplace conviction that it is essential from the efficiency point of view to utilize public and private sector resources jointly in various combinations depending on income level type of social group and similar other factors
*housing certificates as an interest free financing instrument the turkish case a d n a n b u y u k d e n i z i n t r o d u c t i o n the housing problem has for long been one of the most important and urgent social problems in turkey as in most developing countries

*assessment of the outstanding cash value of the certificates is based on demand and supply cost conditions prevailing in construction sector and not on the demand supply conditions in the market for housing certificates
*as such housing certificates are designed both as a means of acquiring a house and as a financial instrument for relatively shorterterm investment of household savings and excess liquidity of companies

*the issued certificate represent ownership of one square meter of a leastvalued flat in respect of location and an extra premium of up to a maximum of is paid if a flat other than a least valued flat is requested
*thus at the outset certificate holders do not exactly know which flat they are purchasing but they know that it is a least valued flat for which an extra premium must be paid if a better flat is to be purchased

*as for those certificates not used in flat purchase at the end of the project period ie years their proceeds cash value of the certificate reached at the end of the period are kept by the administration and are disbursed to the certificate holder at his next application
*however it is also vitally important to generate and sustain substantial amount of fresh funds during the construction phase which is largely possible through attractive and competitive rates of return on the certificate as a short term investment outlet

*besides the fact of being a new system the initially expected success of the certificates was limited partly because of the somewhat improper choice of housing location which created marketability problems and led to weak demand for the houses built under the first project
*in this respect it is recommended from the marketing point of view to choose proper locations in which houses could be built

*this sector has been characterized by several negative manifestations including insufficiency of the existent housing units accumulating deficiency of the available housing units for years and years which resulted in the rise of the average number of individuals per room a shortage in basic services such as water electricity and other service facilities the emergence of slums that are deprived of the least basic services in addition to squatter ownership of lands that are state property

*such institutions could mobilize the savings and deposits of individuals as well as institutions in both the private and the public sectors and invest them in the housing sectors as part of the policy that aims at providing medium and long term financing to citizens and investors in this sector in order to meet the ever increasing demand for housing finance from the public

*b improvement in family incomes in jordan has resulted in the tendency of the citizens to improve the standards of their housing with regard to space and availability of facilities in addition to the desire to own a house rather than rent it
*social development and its impact on the housing problem a increase in the number of independent families and the need of these families for separate dwellings contrary to the prevalent ancient habits when customs and traditions used to allow newly risen families to share shelter with ordinal cones

*the establishment of the housing bank of jordan the major goal for establishing the housing bank of jordan was to produce the provision of the necessary funds to contribute to the solution of

*in order to put this policy into effect the bank entered into strong competition with the other banks and financing institutions and managed to augment its share of the deposits market which stood at about million dinars by the end of the year
*enhancing the formulation of unified specifications and standards for buildings and their requirements in order to develop a healthy base for housing industry and lead to reduction of costs of construction

*the bank policy in mobilizing savings and deposits is mainly based on the following aspects enhancing banking consciousness and enlarging the base of dealers with the bank with emphasis on small savers as well as enhancing and encouraging saving among citizens
*offering privileges and easy terms to the deposits and savings that compete with the privileges and terms offered by other banks and financial institutions and continuously developing and improving these privileges

*development of the deposits accounts procedures and methods adopted by the bank for implementation of its policy for mobilization of funds saving accounts prize in order to implement its policy of attracting small savings the bank has innovated the system of the saving accounts prizes in in accordance with which it offers monetary prizes to those fortunate persons who had saving accounts with it
*millions of dinars record of the development of deposits balances the base year being number of deposits accounts record of the

*the system of saving accounts prizes has proved to be very effective since the balances of saving accounts of the bank have reached a level that exceeds the level of these accounts in the other banks in jordan
*the value of the highest prize being dinars in addition to a special award every month at which the number of prizes is and their total value is dinars and highest prize is dinars

*l ending activity of the housing bank foundations of the banks lending policy the housing bank offers housing finance to all citizens irrespective of the levels of their incomes in order to build lodgings of all sorts and it abides by a clear policy in the field of lending based on the following aspects defining clear curt criteria for determining the amounts and terms of the loans
*consideration in this respect is given to the borrower s income his ability to repay in the shortest possible period safeguarding speedy circulation of funds and providing opportunities for the largest possible number of citizens to benefit from the bank s loans and faculties

*within the frame work of implementing these policies the bank takes into consideration the following controls and procedures i making sure of the economic feasibility of the financed project and of the ability of the borrower to repay the debt
*according to this principle interestless support offered by the bank to low and medium income groups is compensated for by the high rates charged on the loans offered to other well to do groups

*types of loans offered by the bank in order to implement the lending policy of the bank the housing loans have been diversified according to the diverse parties that benefit from them and the mode of financing used
*this type of loans comprises two categories namely a loans to individuals with low and medium incomes the bank offers this type of loans to citizens according to the following criteria the borrower s monthly income should not exceed dinars

*loans for real estate investment this type of loans is offered to investors in housing and non housing buildings developers in varying amounts depending on the areas and cost of the financed project subject to the following criteria the loan period is years two of which are the grace period

*loans for the maintenance of lodgings appreciating the importance of the existent housing units as part of the national wealth which should be preserved and continuously sustained with maintenance the bank started during the year to offer loans for the maintenance of lodgings

*thus the department enjoys the advantage of fast circulation of funds whereas the bank shoulders the load and risks of the slow circulation of these funds as a result of dealing with the beneficiaries of the department s projects on behalf of the department

*loans for the real estate security program during the year an agreement was concluded with the untied states agency for international development usaid according to which the agency made available and guaranteed a long term loan amounting to million dollars borrowed by the government of jordan from the american capital market

*administered loans as a result of the effectiveness of the administrative and organizational procedures applied by the housing bank the high competency the bank has shown in recovering the installments of its loans and in order to avoid duplication of efforts and institutions certain organizations have authorized the bank to administer the housing programs which they finance and implement for the benefit of citizens
*in this framework the authorities in the valley of jordan have undertaken the implementation of a big housing project for settling the farmers in this region

*number of units which the bank participated in their financing classified according to the purpose of the loan a construction of buildings and or their completion and or expansion b buying buildings and or providing for their maintenance c buying piles and constructing buildings on them total number of financed units
*housing units including the loans offered to the housing corporation whether form the housing bank or the central bank of jordan

*ratio of the areas which the bank participated in financing their construction and or expansion and or completion to total areas allotted in the kingdom financial investment in order to realize the role the bank could play in promoting building industry and supporting local development projects in general as stated in its law the bank has worked out a specific policy in the field of investment
*this policy is mainly based on establishing and contributing to economically feasible projects in the construction sector as well as other economic sectors such as tourism and finance especially those projects that are connected with the economic development plans

*real estate investments in order to apply the policy of diversifying investments and sources of income the bank has allocated a portion of its financial resources to real estate investments that are capable of rendering a secure and permanent output which helps the bank to carry on long term lending operations particularly among persons with limited incomes
*other banking services the bank seeks to develop and diversify its banking services to its clients and to satisfy their different needs with the view of persuading its clients to intensify their dealings with it

*the bank extends all these services with competency through a network of branches that are spread all over the different regions of the kingdom
*also deals with cashing cheques and bills as well as exchange services

*because of rapid and far reaching changes in sizes distribution and composition of population as well as in the countries resource bases climatic patterns and income distribution it is now necessary to look at the problem afresh with a view of identifying viable initiatives not only in economic and technical terms but also in keeping with islamic values and world views
*secondly one must examine what the basic islamic teachings in the form of the qur an and the sunnah have to say and they are not reticent about man s habitat and the basic rules of family life

*population poverty and urbanization a recent assessment by the world bank in the world development report estimates that the average annual per capita gdp growth rate in sub saharan africa in the decade was substantially more negative than had been expected
*even this assumes that the countries persevere with structural adjustment progra miss it is also assumed that the countries will receive adequate external assistance including debt relief

*when it was realized that the structural adjustment programs intensified poverty and social burden in africa towards the end of s a program to assist the social dimensions of adjustment in africa sda was set up in the world bank in and funded by the world bank the undp and the african development bank

*current magnitude of the shelter problem a general over view of the housing situation in africa will reveal that there is a serious deficiency in the housing stock in all african countries especially in the middle and low income brackets as a result of the substantial gap between demand and production
*it notes however that the bank has realized that housing the poor will not be possible as the projects are not easily replicable without improvements at higher policy and institutional environments that would facilitate reduced shelter costs and expanded inflows of financial resources to this sector from various sources

*the private sector has fueled construction of shanties for quick maximum profit the public sector has in some cases lacked commitment to the provision of low cost housing and has not had sufficient technical administrative and financial resources to produce acceptable housing in sufficient quantities
*in zambia for example whereas the total shelter need for the period was dwellings the additional dwelling units provided during the same period were for medium and high income groups

*on top of finance related problems there are also problems arising from poor urban management especially with regard to the provision of infrastructure and social sector projects problems with policies that do not ensure land conservation or the efficient usage of land high input of imported building materials in a situation of limited foreign exchange reserves and poor dissemination of information and research findings

*gaps that should be addressed by policy it is in view of the above that any future policy considerations should examine the following areas for sustainable shelter sector development continued policy of creating an enabling environment for the development of shelter in africa one increasingly less involved in the direct financing of complete housing units
*measures geared to the improvement of urban management a lot needs to be done to improve the local revenue collection machinery land use planning and development control strategies which stress not just the sporadic interventions but also cover policy and institutional issues of greater importance to national economics and productivity of cities extending to urban

*were the land is available the poor could not build up to the expected standards because of the cost of materials laws prescribe where people have to build and standards prescribe how they may build
*it is my firm contention that gradual improvement of housing conditions over time will only emerge if governments muster the political will and set in motion the process that will do this

*if anything the iysh reinforced the need for governments to take low income housing seriously because a c the housing markets because of its extreme commercial nature will not cater for the lower income groups who are unable to bid in it and a c the cost of construction is far too high on average for the low income groups
*such assistance programs have been a c upgrading of informal settlements by provision of services and regularization of tenure and a c provision of minimally serviced sites ie with roads water and sewerage facilities and then assisting the plot holders to build their own houses despite these solutions the number of the homeless has increased so much that we are still talking about it

*high tech solutions involving prefabrication of dwelling components or construction of high rise blocks of apartments using the latest technology and materials this method is the most expensive and only suitable for the rich
*a c investment in low income housing demands less on skilled labor which is a scarce resource and also less on capital and foreign exchange and it usually utilizes locally available products

*housing finance housing development finance institutions in africa the development of housing finance institutions is strongly related to the general sophistication of a country s financial system which in turn is closely related to overall economic development
*this may be done by ensuring that there s access to finance for building provision of infrastructure ie on unserviced sites adaptation of appropriate building technologies as well as unhindered access to land particularly for low income housing

*this has been partly because of deficiencies in the entire financial institution industry and partly because of the underdeveloped nature of the housing markets characterized by low property transfer activities and inadequate land registration syste miss there is a whole range of issues that need to be resolved in developing viable housing finance institutions and especially in determining on who should get housing finance including a c lower versus higher income groups a c construction versus long term financing a c first time owner versus others a c upgrading renovation versus long term financing a c the place of housing finance in the development of the financial system as a whole
*however such resources have found it easier to go to financing commerce construction and industry than to finance mortgages existing institutions are more urban based and relate only marginally to the bulk of small holders especially in non urban areas

*this often amounts to mobilization of short term saving funds and committing them into long term capital investment progra miss whereas the broad objectives are normally to increase the supply of shelter the focus tends to be on the private sector emphasizing self financing schemes covering a broad array of areas including poor low income self help housing site and services land development and cooperative housing

*the demand for housing development finance institutions in the majority of cases in african countries formal sector institutions specializing in housing finance have lent almost exclusively to middle and high income housing in urban areas
*credit unions and employers short term funds from corporate savers advocates accounts parastatals and so on funds obtained by refinancing of mortgages and in advanced markets funds generated by sale of special tax free housing bonds in large denominations to individual savers

*interest rates have had to be high because of the increased risk of lending to the poor and the drudgery of administering many small loans the down payment expected has been substantial because of the poor s irregularity of income
*in africa governments have erroneously forced parastatal housing finance institutions to be excessively concerned with providing subsidies especially in pursuit of affordability so where housing finance institutions have existed many have adopted inappropriate lending policies which have jeopardized the efficacy of their operations and seriously impaired their viability

*since the greatest shortfall of funds in the lower middle income and the low income categories there is need to emphasize support for housing finance companies with the potential to finance the lower income category of borrowers in order to support the availability of mortgage funds in the form of long term loans and bridging finance encourage domestic savings as a basis for a fund for long term investments in the housing sector encourage home ownership and the granting of loans for construction and purchase of houses and land build up the stock of mortgageable assets give some depth to the system
*assistance should be extended to mortgage agencies to respond to changes in economic circumstances to mitigate the possibility of lending on negative interest rates and to avoid recapitalization of their assets

*the building materials sector the role of human settlements management in promoting sustainable development includes promoting the use of indigenous building materials and appropriate construction technologies inter alia by revising building and planning codes and supporting small scale production processes
*theses include the mortgagee s right to sue on the contract to repay foreclosure right to sell or to appoint a receiver

*the contribution of these materials to the cost of a low income housing varies from project to project and depends on the design standards
*for locally fabricated materials using imported inputs as in ii above the import content is fairly high since only labor and limited inputs are procured locally

*in kenya where deliberate emphasis was placed on the use of local materials it was found that the import content was less than for walling materials and timber for cement and aggregates mainly due to explosives and transport and more than for louvers glass and cis

*low cost housing project in grand yoff dakar senegal the government of senegal has adopted a housing policy that aims at developing and improving delivery systems in order to ease the acute housing shortage prevailing in the country due to population growth

*it is designed to promote an enabling environment by improving access to housing and basic infrastructure services by the low income groups through provision of land tenure security and serviced land restructuring and strengthening the housing finance and housing delivery system greater community participation and production of local building materials among other things

*in order to ensure that appropriate measures and policies are instituted for managing the country s housing sector shelter afrique in at the request of the government of djibouti agreed to co finance a feasibility study on some housing projects in the country
*site and service scheme in enta nord conakry guinea the republic of guinea is a predominately islamic country in west africa with an area of sq

*from this simple tale we can learn a great deal about the virtues and the practicabilities of forthright land transactions self help construction simple materials and finishes and the basic necessities
*again whoever humiliates or despises a muslim male or female for his poverty or paucity of resources will be disgraced by god on the day of judgement

*market operations the profit motive labor relations land tenure and corporate ownership are only some of the business relationships which are well covered by existing islamic laws however the application of the law may need to be adapted to the prevailing economic situation
*for instance interest bearing mortgage loans are strictly speaking not permissible but is there a way of designing participating mortgages where interest is replaced by profit or equity in the asset could waqf in its various forms be used to create land reserves and promote new housing development

*although national governments have their own shelter strategies and some are advocates of the un global shelter strategy to the year there is nonetheless a case for looking at the problem from the islamic perspective with a view of supplementing the remedial actions already being taken by governments individuals and private commercial interests
*immediate priorities although it is not the purpose of this paper to propose solutions or make specific recommendations it will be worth our while to explore the possibilities for future remedial action and the direction in which further efforts should be moving

*in conclusion we can say that current efforts could be strengthened and a new dimension added if inspiration was drawn from islam and the wide diversity of cultures found in africa if there were greater cooperation between countries and regional institutions if poverty deprivation and homelessness were seen as challenges rather than end states
*getting african countries to assist each other on a bilateral basis this is clearly taking place in a small way but a lot more could be done assistance could be in the form of expertise research findings equipment and so on

*this is on the demand side on the supply side he cites numerous factors which include low and declining per capita income falling welfare spending mismanagement of land resources inadequate infrastructure and trained cadres direct state involvement in the construction of housing with a bias for middle and upper income brackets general lack of financial institutions and instruments for channelling private funds into the housing sector and the administrative and legal restrictions facing investors in this field
*mister yahya ascribes the widening gap between the demand and supply of houses in muslim africa to high rates of population growth and urbanization coupled with growing internal and external pressures for better habitat

*in islamic countries housing policies should be guided by a number of principles such as decent living conditions for every family economy self and mutual help equity cleanliness privacy and the protection of the environment
*urban houses are generally to times more expensive than rural ones whereas urban incomes are only to times rural incomes

*in fact the ultimate success of this approach will depend on the creation of a set of integrated institutions the provision of high quality management and personnel the development of appropriate financial organs and techniques the modification of property laws the continual flow of substantial foreign aid and considerable state subsidization
*but the experiments are still very small and young and they neither confirm the superiority of the approach nor do they reveal any characteristics that render it particularly suited to societies that are guided by islamic teachings and values

*thus families that allocated on average of their income to purchasing houses required years for the poorest and years in the case of the richest to acquire houses
*assuming overall overcrowding in houses which raises inhabitants per house from an ideal to persons in towns and from to in rural areas sudan s million town dwellers live in

*the khalifa omer directives to his provincial governors entrusted with establishing new towns emphasized i choosing of sites with a climate and vegetation that are as akin as possible to the dwellers original habitat ii securing access to water and pasture iii ensuring uninterrupted contact with the central authority with no river or bridge intervening between the two iv specifying the width of main and side streets fixed at and a minimum of seven dhira arm length v group all on tribal basis and vi locating public buildings in accessible sites
*these principles must guide specifically a the choice of habitable sites b site planning c house structures d public services e financing of building f property rights and obligations g state financier landlord tenant relations and h protection of ecology

*on the basis of mister yahya s exhaustive presentation and the observations we have made above one may suggest the following guidelines for an islamic housing policy a housing is one of the requisites of a decent living which the muslim state undertakes to provide to every citizen at reasonable standard cost

*h property iegislation should protect proprietors against trespassers tenants against wanton eviction debtors against creditors excesses creditors against evasive borrowers and society against wasteful use of land resources in the form of lavish construction misuse of needed housing space and destructive resource utilization in housing schemes
*i am personally indebted to him for alerting me to many aspects of the housing problems of muslim states and the need for devising appropriate islamic solutions for them

*the symposium was attended by scholars and specialists representing regional and international financing institutions involved in housing activities in jordan kenya canada india and turkey in addition to representatives from the islamic development bank and local banks and financing institutions in sudan
*the symposium highlighted the importance of the issue of housing being one of the basic human needs that has been given considerable importance in islamic thought

*in the instalment sale contract it is prohibited to separate the return for accepting deferred payment from the cash price in such a way that it becomes directly linked to the duration of the transaction whether the parties agree to calculate this return according to a certain rate or the prevailing interest rate in the market
*first sharp ah related recommendations in an effort by the participants to fulfil the duty of identifying methods accepted by shari ah for house building financing the following financing techniques were proposed i

*c this financing technique may be applied for purchasing already built houses or those to be constructed at the cost of the financier taking into account the preferences of the prospective buyer as regards the specifications of the house
*if the debtor fails to pay the installments as agreed upon it is not permissible to charge him any amount in addition to the principal whether or not an advance condition was made to that effect since such an additional amount constitutes prohibited riba

*d among the financing techniques that are based on deferred sale and which should be considered by governments and charitable organizations is construction of houses to be sold to those in need of them on the basis of the actual cost without any profit added ie through tawliyah sale
*decreasing musharakah as will be seen later decreasing musharakah is composed of partnership ijarah and sale and it takes place when a financing institution enters into a partnership agreement with individuals who can participate in the construction cost by providing cash and or the land

*proportionately the rental amount is reduced and the share of the beneficiary in the ownership of the house increases until he has full ownership of the house at which point both the partnership agreement and the lease contract come to and end
*however a pledge amounting to final commitment may be given by either party declaring an offer to sell or to purchase according to the maliki fuqaha

*these provisions require that the owner lessor bears all the responsibilities relating to the property he owns such as maintenance and the like until the lease ends up by selling the property to the beneficiary
*leasing ending with ownership this technique is similar to that of decreasing musharakah with the exception that here there is no prior joint ownership of the property

*this technique is suitable for low and middle income groups who own the land but cannot afford to provide the materials and the construction cost in advance
*vii istisna mugawalah contracts this technique is used when an individual who owns a piece of land wants to enter into agreement with a contractor to build him a house according to certain specifications in return for an agreed cost

*the beneficiary may either pay the remaining amount of the cost of the house or otherwise hire the institution s share according to a formula similar to that of decreasing musharakah
*institutions involved in house building financing should endeavor to establish subsidiary real estate companies to provide construction materials and services to beneficiaries at reasonable cost

*the experiences of cooperative housing financing institutions should be studied so as to be adopted in the field of islamic financing of housing activities
*islamic states and institutions should cooperate together and coordinate their efforts in order to develop modes for house building financing that are compatible with islamic shari ah without foregoing the proper banking requirements

*further meetings and seminars should be organized for exchanging experiences among the islamic financing institutions operating in housing financing at the local regional and international levels with the view of identifying other islamic financing techniques
*research institutions which are active in developing and improving construction materials should be supported and encouraged to establish training centers for low cost housing

*the islamic bank for western sudan
*annex iii particpants from local banks and financing institutions no

*annex iv program of the workshop sunday coffee break first working session presentation of doctor ahmed ali abdullah s paper on forms of investment in real estates discussion on doctor abuddlah s paper second working session presentation of doctor abdin salama s paper on housing finance in islamic countries discussion on doctor salama s paper presentation of doctor s

*it is also charged with the responsibility of assisting in the promotion of foreign trade especially in capital goods among member countries providing technical assistance to member countries extending training facilities for personnel engaged in development activities and undertaking research for enabling the economic financial and banking activities in muslim countries to conform to the shad ah

*islamic research and training institute islamic development bank tel fax
*tlx cable bankislami p


 ''Please note, This is an auto generated summary based on sentances position in the document and other factors''
== DOCUMENT WORD ANALYSIS ==
=== Main Category ===
: AlHuda Material\islamic banking


=== KeyWords ===
contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project



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== DOCUMENT REFERENCES ==


=== Number of Pages ===
272


=== Published Date ===
2006-05-27 15:01:24


== Full Document ==


[https://www.hodhood.com/en/HodHoodDocuments/IslamicFinance/IslamicBanking/Islamic%20Banking%20modes%20for%20House%20Building%20Finance%20by%20Mahm.pdf Read the Full Document]


[[Category:Islamic Finance]]

[[Category: Islamic Banking]]