I hope everyone is well.
My question is regarding securing money from an investor, lets say for a property purchase.
The way it usually works is for example:
I secure a 100k loan from an investor and he/she is getting a fixed return of 8%. This usually involves paying interest on the money that has been borrowed.
Is there a halal alternative to this or a Halal way of structuring this, so there is no interest involved? If so, how would it work?
I hope my question makes sense, JZK.
Wa alaykum salaam,
You can consider giving investors either a debt structure or equity.
In the scenario of a debt, you can consider purchasing the property and on-selling it to purchasers. This is a Murabahah structure and gives a fixed return.
In the scenario of equity, you can do what most contemporary Islamic banks do, which is shared ownership with equity acquisition periodically until the customer owns the property outright. This model is known as Diminishing Musharakah. This means that the investors receive a monthly transaction fee for selling a percentage of their equity, in addition to rental income for leasing their share to the co-owner.