Hello Friends, I am new on this forum. I have a question about interest.
Suppose I have a house which I give on rent for one year @ Rs. 5000/- per month. After one year, I would have earned Rs. 5000 x 12 = Rs. 60,000/- plus my principle (the house) back. Now suppose I have a car which I give on rent for 1 hour @ Rs. 500/-. I have earned Rs. 500/- plus my principle (the car) back. Now suppose I have one acre of land which I lend for one year @ Rs. 15,000/- to someone. After one year, I will get my principle (one acre land) back and will have earned Rs. 15,000/- on that land. Now, if I give Rs. 100,000/- @ Rs. 10,000/- for one year, I would have earned Rs. 10,000/- plus my principle (Rs. 100,000/-) back. What is the main difference? Just of liquid cash? Or does it mean that renting and lending money on interest are two angles of the same object? Moreover, there are a lot of things which we would need for a temporary basis and not for permanent which is quite obvious with human requirements. If renting is haram, then what is the solution for getting something on temporary basis?
Thank You
Nice question. An Islamic scholar would be able to answer that one
In my opinion, when you lend money, the risks and rewards associated with the cash are transferred to the other party. For example, when you give cash, the risk of the cash being stolen and the benefit of higher exchange rates if the second party purchases and sells foreign currences
Where an asset is given, the risks and rewards remain with the lender. For example, risk of the building/property getting damaged and the benefit of increase in fair value if the lender is to immediately sell the land
If the risks and rewards are borne by the second party then why should the lender earn from it? Does not it seem illogical?
Well, this is what i concluded after thinking for few minutes upon reading your question
renting is't haram in islam unless the purpose for which asset is been rented for is not according to sharia. asset (shop, house, car, land) is rented for something haram in islam than the rentals coming from that asset are haram. like if one rents a shop for a business of alcohol which is haram in islam than it is haram else it is not. about lending money and chargin any amount larger than the loan is prohibited for many reasons, first thing to be clear is renting a house car or land is something else, lending money is another thing. islamic theory is't based on a single aspect but on different, if one is in real need of money and asks for a loan and lender charge him extra amount for the loan than this practice is wrong and is why prohibited in islam. one deposits cash for fix percentage of return is wrong why because the person who has taken the cash might suffer loss but still have to pay fixed return to lender. another aspect is if lender is to just provide cash and not participating or making no efforts to earn from that cash than why should he be given extra amount?...if i own a building and i being disable dont have any other source of income beside renting a portion of the building for a business whihc is allowed under sharia than on which ground one can say the rentals are haram? even if i get another source of income i still cannot find any reason not to rent becasue it is haram. the person who is using the rented building ofcourse is making his living through it, so it cannot be wrong. in case of liquid cash lending money still is been allowed but charging extra amount is haram coz no efforts of lender are been made instead of lending the cash, reason is same as islam never allowed such practices which somehow disturb or lead to disaster. if lending money on extra amount was been allowed than those who realy are needy might suffer for paying the amount back.
ijarah(leasing)
according to islamic scholers ijarah(leasing) is a business transaction, whereby the owner of something (specicifit property) transfers its usufruct to another person in exchange of rent. lesse in this case is "mustajir" lessor is "mujir" and rentals are "ujrah". <b>if one in detail go through the sharia rules for ijarah, there is one "it is necessary for a valid contract of lease that corpus of the leased property remains in the ownership of the seller ad only its usufruct is transfered to lessee. thus anything which cannot be used without consuming(money, eatables, fuel etc) cnnot be leased out. if anything of this nature is leased out, it will be deemed to be a loan and all the rules concerning the transaction of loan shall accordingly apply. any rent charged on this invalid lease shall be an interest charged on a loan</b>.
<b>another thing i should mention is, in case of lease lessor assumes the full risk of the corpus of leased asset, if the asset is destroyed during the lease period the lessor will suffer the loss. similarly if the leased asset looses its usufruct witout any misuse or negligence on the part of the lessee, the lessor cannot claim the rent, while in case of interest based financing, or money advances for fix return which is by law wrong, the financier is entitled to receive interest even if the debtor did not at all benefit from the money borrowed</b>
rules of rentals in leasing are strict enough as in any case it should't be a form of interest, here i will put an issue which will clear the concept..
penalty for latee payment of rent
in some contract a panelty is been imposed on the lessee in case he delays the payment of rent after the due date, this panelty if meant to add to the income of the lessor is not warranted by the shariah. reason is that the rent after it becomes due, is a debt payable by the lessee, and is subject to all the rules prescribed for a debt that monetary charge from debtor for late payment is exactly riba which is prohibited, therefore to avoid the adverse consequences resulting from the misuse of this prohibition an alternative is been used in islam, which is if lessee fails to pay rent due to his negligence, he will be charged panelty (extra amount than rent) but to the charity not as earning for lessor.