Understanding Islamic Finance #
Question answered by Ustaz Haron Masagoes of FAiWA.
The ruling that in the absence of a shariah-compliant loan, Muslims are allowed to use HDB/bank loans for their residential property under the ‘darurah’ (necessities) principle and also ‘Hajah’ (a universal need to remove difficulties) as a basis for relaxing the prohibition of Riba in the case of primary residence home mortgage.
There are many parameters to mention but it’s sufficient if we can follow the 3 parameters here:
1st parameter: The difficulties factors and expected hardship are real (happening as we speak) or at least highly anticipated to happen by way of experts (e.g. Mathematical) calculation. In the example above, if the depreciation of assets is highly probable to happen and the way to preserve wealth is to upgrade the home asset is a validation to this parameter. Further to this, the upgraded primary residence can safeguard the family’s wellbeing and even to the beneficiary when no longer around. There is one legal fiqh opinion that goes “the unlawful matters that render to be permissible because of darurah or hajah factors, are constrained by the presence of these factors” hence as long as the factors are still around, you may apply this ruling for subsequent conventional loans for upgrade or downgrade on the primary residence.
2nd Parameter: The considering factors of the darurah/Hajah are not within the realm of haram matters like purchasing alcohol or stealing people’s property where in essence it will put harm to others and infringe on others’ rights.
3rd parameter: The relaxation of taking usurious loans must be confined to fulfill the general needs of the situation and cannot be taken as a free license to take up as many opportunities from the usurious loans. This is why we limit the usurious loans to primary residence and not extend to investment properties.
Under all such cases keep seeking Allah’s forgiveness and keep trying to pay the principal of the loan with any money you can lawfully get to get yourself rid of the Riba as soon as you can. With our limitations here in Singapore, the ‘darurah principle and Hajah’ are applicable for the 1st residential house and the need to upgrade after that.
The 2nd property for investment has two opinions that allow and disallows using the conventional loan as these scholars view the principle of darurah in different ways.
