Buying land not clearly demarcated

Investment Questions and Chats General Investment
#1

Assalam alaikum

I participated in a land development scheme a few years ago. The way it worked was as follows:

  1. Developer advertised a scheme where a large chunk of land was being divided into smaller lots and sold off for the purpose of constructing houses and commercial buildings.
  2. Applications to subscribe to the scheme were sent in by the general public. The developer had published the land values for different lot sizes.
  3. Upon acceptance, the developer issued certificates to people confirming their share in the scheme and the square footage of land they owned. However, the land was not physically demarcated and allocated to people yet.
  4. I bought a piece of land from someone who was an initial subscriber to the scheme. I paid the seller the base price (i.e. value of the land prescribed by the developer) plus a markup. I received a letter from the developer confirming they have registered the sale and stating the amount of land I owned.
  5. As mentioned above, when I bought the land it was not clearly demarcated. I knew my share of land would be somewhere in the overall project but it was not “allotted” to me yet. The land was allocated later based on balloting. Land prices within the scheme vary based on various factors (for example, proximity to amenities) and it was your luck if you were allotted a nicer lot.
  6. In between the time the scheme was launched and the allotment of lots to subscribers (the allotment happened in phases and took from a few months to a couple of years), there was a lot of buying/selling going on and the markup for different lot sizes varied and would fluctuate on a daily basis.

My question is, was my purchase a valid transaction? What, if any, are my obligations now? If I sell this land now, can I keep the capital gain?

Jazakumullah khayr.

#2

Assalam alaikum @Mufti_Faraz_Adam @Mufti_Billal , I would be grateful for your advice here.

Jazakumullah khayr.

#3

Wasalam

May Allah bless you.
Mufti Taqi wrote a similar scenario in his book Fiqhul Buyu’.
He says that, usually the prices of such pieces of land differ due to certain criteria. For example, the price may reflect the location of this piece of land, which may be somewhere in the middle, near a main road, or close to amenities. When this is the case, then according to Qadhi Abu Yusuf and Imam Mohammad among the hanafis, it will be permissible to buy such land.
This is because that, you not only know the size of the land you are buying, but you also have a good indication of where it will most likely be.

In contrast, according to Imam Abu Hanifa, it is not permissible to trade such land. This is because, the level of uncertainty surrounding the land sold, can lead to disagreement between the seller and buyer.

According to the principle of Abu Yusuf, we can even say that once you’ve purchased the land, you can sell it, even though it has not been demarcated yet.

Based on the above and what you mentioned in your Q, there would have been nothing wrong with your transaction inshaAllah.

And Allah knows best!