Anyone doing/done mortgage with Ijara Canada (Ijara loans)

[oaw]

While I appreciate the importance of faith, I don't think any of these financing providers offer loans in the true spirit of Islam. Until the lender truly shares risk with the borrower, and until rates aren't determine by traditional variables (such as the BoC rate, LIBOR, etc.), none of these financing facilities are truly Sharia'a compliant. This is true of virtually every Islamic bank and lender in the world.

I had checked with An Nur in October 2017.
They said that they are out of funds.
I also had called Ansar, but Ansar is not promising if the can fund me after 6 months. There is no promise it depends if they can raise funds.

 

[oaw]

Hello everyone,
Where are we on this topic? Any new halal companies offering truly islamic mortgage?
I looked through Ijara CDC: https://ijaracdc.com/sharia-compliance/islamic-finance/
Any thoughts on them?

My plan to move to Canada hinges a lot on availability of halal islamic finance options.

I hope you had moved to Canada by now.
Below are thoughts about Ijara, shared in this forum
https://www.canadavisa.com/canada-immigration-discussion-board/threads/anyone-doing-done-mortgage-with-ijara-canada-ijara-loans.120787/#post-5356520

 

[oaw]

Has anyone deal with Zero Mortgage or Aya Financials (http://ayafinancial.com/)

 

[AHBM]

What you described is the basic "Sharia'a compliant" Ijara structure. A person who wants to buy a house comes to an Islamic bank. The bank buys the house on behalf of the customer, and has the customer sign a 25 year rental agreement whereby the customer agrees to pay a certain amount of "rent" each year. In return, the bank grants the customer use of the property for the 25 years, along with a promise to sell the property to the customer at the end of the term for a nominal sum ($1).

The rent payments include the basic principal amortization ($300,000 / 25 years / 12 months) plus a "profit" payment. The profit payment is exactly the same as interest, and is even linked to the same benchmarks (LIBOR, etc.). Moreoever, despite the bank "owning" the house for the next 25 years, they assume no risk at all. So, if the house is destroyed in an earthquake, the "tenant" still has to continue to pay the rent for the remaining years. Or, if house prices fall, the tenant is the only one who will suffer.

Somehow, the Sharia'a "scholars" who charge obscene amounts of money for issuing fatwas have deemed this to be legal under Islamic law, even thought there is virtually no difference between this and a mortgage.

The first point of clarification is that "Scholars" or rather Muftis in this particular case do not charge any amount for the fatwa. I can attest to this 100%. In canada you have only a handful of fatwa-issuing authorities, and they do not charge.

The second clarification is that "virtually no difference" is not the same. A chicken slaughtered with Tasmiya (reciting bismillahi Allahu Akbar) is shariah compliant, but the same chicken slaughtered without that tasmiya becomes shariah non-compliant. The issue is simple. Sharia has its own sets of rules. Shariah allows to structure the deals in ways that it remains Shariah Compliant while circumventing "interest".

The biggest litmus test ought to be if the the Shariah Compliant deal has autonomy and independence of transactions within it. The rental agreement MUST remain separate from the purchase of shares agreement. One cannot be pegged to the other. If they are, then due to the interdependence the Ijarah Financing will be Sharia non-Compliant.

In case of calamity or default, the Mufti must review the procedures followed to see if they are Shariah Compliant. Most of these Islamic financing houses run from those Muftis who are willing to do a full review and present their finding. But most of these houses cannot take the risk of being publicly informed which clauses in their contract are non-compliant as that will devastatingly harm their product.

 

[AHBM]

I really have a thought regarding the "interests" on borrowing money in general.

Back in time when Riba was prohibited, money was in the form of Gold and Silver and other precious materials. So if you borrow 1 kg of gold return it 1 kg because gold holds its value. And so you are not allowed to borrow 1kg and returned it 1.1 kg because this is Riba.

Nowadays, the definition "itself" for the money has changed. It is just a paper bill that represents a market value without out any gold treasury reference (Canada sold almost all its Gold reserves, google it). So, the current money is not similar to the money back then during early stage of Islam.

Here is example,
you borrow in 2017 100,000$ which is equivalent , "for example" to 1kg of Gold
do you want to convince me that after 10 years you wanna return it as 100,000$ or it will be Riba? will 100,000$ hold the same value of gold after 10 years? no inflation?
What makes sense to me and I think it should be Halal is that if you borrow "X amount of money" equivalent to 1kg of Gold today, then you have to return the same 1 kg of gold even if it will be 2X or 100X amount of money in 10 years. Same gold but different representation.

Since the legal tender (notes) do not reflect a gold pegging, what you are proposing an ad-hoc pedding with the gold. Instead, what you should then do is, in 2017, on the day you want to borrow 1kg value worth of gold, then borrow 1kg gold on that day instead and NOT its value. This way, you will be Shar'an bound to return 1kg of gold and not its value.

Understand that the paper money, though without any intrinsic value to itself is still considered as Thaman Urfi according to Shariah. Since it is thaman, it will follow its rules as a thaman.

Now, what you are suggesting can be extremely detremental to your dealing. This is because the market's index for the canadian currency will change based on the US $, while you pegged you "x amount of money" with a kg of gold... So in reality the change in gold pricing over 10 years reflected in the Canadian dollars will not be an acurate change in gold value, since canadian dollar value is ALSO affected by US dollar or other factors etc.

Long story short, it is much earier borrow the gold instead, and then return the same amount of gold. and not its value!

 

[AHBM]

Scylla, while I'm sure your colleague has done his research, I can assure you that neither company offers mortgages that are truly Sharia compliant. While their scholars may bless their structures (in return for handsome compensation packages), the easiest way to check if a mortgage conforms with the principles of Islam is to see what happens if you have to sell your house for a loss (i.e., after a market crash). If the bank will share the loss, and forgive a corresponding portion of the mortgage amount, then the risk is indeed shared and the loan is Sharia compliant. However, if the bank still wants all their money back, as conventional commercial banks do, then there is no risk sharing and the loan is considered to be "haram".

In a diminishing musharakah model, if the bank owns, lets say, 60% or even 20% of the house. Why do you feel that in even of default, bank does not have the right to inflate the value of its 20% to cover its loses.

If a car was co-owned between you and your friend, and you want to sell the car in market for lesser price, can you obligate your friend to sell his share at a loss too? In Shariah, you cannot enforce. So if you sold your part of the car at a loss, and the friend inflates his value to get more profits out of his share, he has every right to.

In the case of the house financing, you must first understand that the model is not a LOAN. This is the biggest difference between these models and mortgages. These are asset based deals, where the asset retains its value to the owner of those assets in the %ages they are shared. The rental agreement is a concurrent BUT independant transaction between the bank and the client for the bank's portion of the property.

As for your comment that neither provided shariah compliant, then that may be true due to other factors, just not the one you pointed out in this post.

 

[torontosm]

In a diminishing musharakah model, if the bank owns, lets say, 60% or even 20% of the house. Why do you feel that in even of default, bank does not have the right to inflate the value of its 20% to cover its loses.

If a car was co-owned between you and your friend, and you want to sell the car in market for lesser price, can you obligate your friend to sell his share at a loss too? In Shariah, you cannot enforce. So if you sold your part of the car at a loss, and the friend inflates his value to get more profits out of his share, he has every right to.

In the case of the house financing, you must first understand that the model is not a LOAN. This is the biggest difference between these models and mortgages. These are asset based deals, where the asset retains its value to the owner of those assets in the %ages they are shared. The rental agreement is a concurrent BUT independant transaction between the bank and the client for the bank's portion of the property.

As for your comment that neither provided shariah compliant, then that may be true due to other factors, just not the one you pointed out in this post.

I respectfully disagree with this. A diminishing musharakah partnership is just that...a partnership. In a partnership, or in any other equity venture, the partners share the risks and the rewards. This fundamental concept is what makes such financing permissible under Sharia. However, in practice, this is not the case as the bank reserves some rewards for itself (regardless of performance), while not accepting any risk at all.

Using your own example, what happens if you want to sell the car in the market for a higher price than you paid? What have you done to deserve all of the profits, whereas your friend gets zero? See where the argument starts to falter?

 

[AHBM]

I respectfully disagree with this. A diminishing musharakah partnership is just that...a partnership. In a partnership, or in any other equity venture, the partners share the risks and the rewards. This fundamental concept is what makes such financing permissible under Sharia. However, in practice, this is not the case as the bank reserves some rewards for itself (regardless of performance), while not accepting any risk at all.

Using your own example, what happens if you want to sell the car in the market for a higher price than you paid? What have you done to deserve all of the profits, whereas your friend gets zero? See where the argument starts to falter?

The risk shared in any shariah partnership attached to an asset is not in the ultimate loss in equity. This is exactly what the Shariah keeps clear from. You are viewing this partnership as a business venture/partnership. It is NOT a venture. It is a partnership in ownership. If 2 people co-own a comodity, then both are partner (equivalent to the %age ratio) of that commodity in every bit of it. However, they retain their autonomity of the share they own. The partner cannot impose his will upon the other partner. So when we say that they share the risk associated with the commodity, it means that if the the commodity is destroyed, both of the partners loose. It does NOT mean that if Partner A wishes to sell his share for a higher price, Partner B will take a percentage of that profit. Absolutely not. That independance of the ownership is fundamentally engrained in the core concept of Shar'i ownership.

Yes, the partners are bound in certain manners to protect the other from misuse of the commodity etc. However, these are detail additional terms related to any such ownership. For example, If you and I were co-owning a car, I cannot make changes to the car without your consent, since you own the commodity just like I do. Similarly, If I gift the item, it will not be complete. If I have to sell my share, i cannot sell without having presented you the opportunity to purchase the share first. But even in this, I will not be forced to reduce the sale value of my share. If I want to sell my share for $5000, and you cannot afford that, then too bad. If there is a buyer who is willing to buy it, then as long as you had your first opportunity to purchase it, Shariah requirement is filled.

This is basic understanding which ought to be kept in mind when financing. There was no mechanism of "islamic home financing" in early islamic eras, hence such asset based transactions make a mode for such financing. But the rules will remain same..

If and where the bank does violate any shar'i requirements, then indeed such contract and financing model will be compromised and shar'an non-compliant.

 

[torontosm]

The risk shared in any shariah partnership attached to an asset is not in the ultimate loss in equity. This is exactly what the Shariah keeps clear from. You are viewing this partnership as a business venture/partnership. It is NOT a venture. It is a partnership in ownership. If 2 people co-own a comodity, then both are partner (equivalent to the %age ratio) of that commodity in every bit of it. However, they retain their autonomity of the share they own. The partner cannot impose his will upon the other partner. So when we say that they share the risk associated with the commodity, it means that if the the commodity is destroyed, both of the partners loose. It does NOT mean that if Partner A wishes to sell his share for a higher price, Partner B will take a percentage of that profit. Absolutely not. That independance of the ownership is fundamentally engrained in the core concept of Shar'i ownership.

It is impossible in the examples you mentioned for one partner to sell their shares for a higher or lower price; just like you can not sell half of a car, you can not sell half of a house. So, therefore, both partners' interests are being vended for the same price. However, under the Islamic financing that exists today, despite the partners selling their shares for the same price, the proceeds are not divided accordingly. If the price is high, one party receives the lions' share, while if the price is low, the other party is unfairly rewarded. In either instance, one partner can never receive less than his original "investment" while the other can.

This is not permissible in Islam, no matter how you try to spin it. The hadith clearly say that risk and reward must be shared, which is NOT the case here.

 

[AHBM]

It is impossible in the examples you mentioned for one partner to sell their shares for a higher or lower price;

I can assure you it is completely permissible to sell one's share anyway you wish. There is no Shar'i complication with it.

just like you can not sell half of a car, you can not sell half of a house.

No one is selling half the car. We are selling shares in it. Up until now you had no issue with diminishing musharakah. The whole premise of the diminishing musharakah is that the shares of one's ownership decrease when one sells them. So that is definitely akin to selling portion of the house. The only difference is that when you own 50% of the house, it does not mean that you own the east side or the west side of the house. It means that the item [in this case car or house] is musha' i.e. multiple people have right in every single particle of the item.

This concept is not an advance concept in Islamic Jurisprudence.

So, therefore, both partners' interests are being vended for the same price.

Since you are mistaken on the above concept, your conclusion here is fallacious.

However, under the Islamic financing that exists today, despite the partners selling their shares for the same price, the proceeds are not divided accordingly.

If, in a financing model the price for the share is pre-stipulated according to whichever benchmark, then that is a mutually arranged price. However, since in a diminishing musharakah, sale/transaction of this month's batch of shares to the client is INDEPENDANT from the transaction which will be happening next month, the stipulation of price of the share is merely an ijaab (offer). The ijaab will either be from the client's side to purchase the next shares at particular pricing OR from bank's side to sell them at a particular pricing. Merely ijaab being found does not impose the buyer to make qubool of that pricing, so technically every month when the client buys further shares of the house, the client as well as the bank has full autonomy to negotiate on a new pricing.

So, quite frankly, your approach to the whole issue desires a lot of review.

If the price is high, one party receives the lions' share, while if the price is low, the other party is unfairly rewarded. In either instance, one partner can never receive less than his original "investment" while the other can.

There is no investment brother. There is a commodity and a person is buying a share in it. You are completely confusing the mode of Shirkah here. This is "Shirkatul Milk" and NOT "Shirkatul Aqd".

This is not permissible in Islam, no matter how you try to spin it. The hadith clearly say that risk and reward must be shared, which is NOT the case here.

Could you please post the hadeeth with reference that a shareek in an item may not sell his share lower than the the original pricing. Here I give you the hadeeth when mentions the concept I had mentioned. When a shareek has to sell his share, then that must be presented to the other partner first.

صحيح البخاري (3/ 79)
2213 - حدثني محمود، حدثنا عبد الرزاق، أخبرنا معمر، عن الزهري، عن أبي سلمة، عن جابر رضي الله عنه: «جعل رسول الله صلى الله عليه وسلم الشفعة في كل مال لم يقسم، فإذا وقعت الحدود، وصرفت الطرق، فلا شفعة»

The shuf'a is the right to the share before it is sold in open market. Mustafa al Bughaa mentions in explanation :

(الشفعة) من شفعت الشيء إذا ضممته إلى غيره سميت بذلك لما فيها من ضم نصيب إلى نصيب وهي أن يبيع أحد الشركاء في دار أو أرض نصيبه لغير الشركاء فللشركاء أخذ هذا النصيب بمقدار ما باعه.

i.e The partner will be presented the share in value of the amount for which the other partner wants to sell in the open market. The shareek will either pay that listed price, or will relinquish his right to purchase.

I feel since you are still looking at this from the Shirkatul Aqd point of view, your conclusions mismatch here.[/quote][/quote]

 

[Has_san]

Assalam alaykum Brothers/Sisters,

I am here in the same confusion what you guys are. I have recently moved to Canada and now looking option to get Sharia Compliant Mortgage which seems to be tough to find. But IjaraCDC is basically convincing me with their Fatawas and Mufti in their Sharia Board.

This is their recent Fatwa updated on 2012 which is 7 years old now.

People around me are basically demotivating me going for Islamic Finance as there is risk involve within the company and I really don't want to go for conventional mortgage as it involves Interest. Paying for your own house than renting a house always sounds better as you own the asset and will be beneficial for you and your kids in the future.

I need someone who can share their experience about IjaraCDC so that I can speak to them with confidence. It will be highly appreciated if you can share your experience with bit of detail.

Looking forward to the kind response.

Regards,
Hassan

 

[oaw]

Assalam alaykum Brothers/Sisters,

I am here in the same confusion what you guys are. I have recently moved to Canada and now looking option to get Sharia Compliant Mortgage which seems to be tough to find. But IjaraCDC is basically convincing me with their Fatawas and Mufti in their Sharia Board.

This is their recent Fatwa updated on 2012 which is 7 years old now.

People around me are basically demotivating me going for Islamic Finance as there is risk involve within the company and I really don't want to go for conventional mortgage as it involves Interest. Paying for your own house than renting a house always sounds better as you own the asset and will be beneficial for you and your kids in the future.

I need someone who can share their experience about IjaraCDC so that I can speak to them with confidence. It will be highly appreciated if you can share your experience with bit of detail.

Looking forward to the kind response.

Regards,
Hassan

W Salaam Brother Hassan

Well, I landed in 2013 and spent nearly 5 years in my search for a trusted Islamic Finance. For me a trusted finance is the one that is Islamic halal and does not involve any interest, it has a valid Fatwa from a scholar and the system is also reliable (Read about Ummah Financial and why they had failed).
So I meet almost every Islamic Finance provider out there.
I meet Ijara in 2014, and I was not convinced with them at that time, i am not sure if they had changed their model.
I had meeting with, Ijara Canada, An Nur Housing co-operative, Ansar, Zero Mortgage and Aya financial. Hence, I will also recommend you to have meeting with all of them and anyone new in town as well. This will give you good knowledge to decide whats good for you.
I ended up with AyaFinancial.
An Nur and Ansar are also good but they were not able to finance me.

 

[rabab.saghir]

Hi, can you tell me how your experience has been with Aya financial?
And how does it work?

W Salaam Brother Hassan

Well, I landed in 2013 and spent nearly 5 years in my search for a trusted Islamic Finance. For me a trusted finance is the one that is Islamic halal and does not involve any interest, it has a valid Fatwa from a scholar and the system is also reliable (Read about Ummah Financial and why they had failed).
So I meet almost every Islamic Finance provider out there.
I meet Ijara in 2014, and I was not convinced with them at that time, i am not sure if they had changed their model.
I had meeting with, Ijara Canada, An Nur Housing co-operative, Ansar, Zero Mortgage and Aya financial. Hence, I will also recommend you to have meeting with all of them and anyone new in town as well. This will give you good knowledge to decide whats good for you.
I ended up with AyaFinancial.
An Nur and Ansar are also good but they were not able to finance me.

 

[Adora11]

Is it safe to share our information with ijara although their main office in in us

 

[Adora11]

Yes I have a mortgage with them..

Can u please share your experiance.. and is it safe to share our information with them.. because their main office is in us and not canada