Benefits of Ijara Loans for the Real Estate - ijaraCDC

Benefits of Ijara Loans for the Real Estate

Times have changed and so have symbols of social status. They vary across different nations of the world too. But the Great American Dream of owning a house is probably one wish that is not just confined to the shores of the United States but is shared by millions of people all over the world and remains unchanged howsoever times may change and aspirations take different forms. As such, the performance of the real estate sector is of particular interest to market analysts and financial pundits. The interest has heightened after findings that suggest ijara loans have flourished in the real estate sectors despite the recessionary trends that had gripped economies around the world.

It is not only Islamic scholars but also market watchers who are interested in the benefits of ijara loans for the real estate sector that have prompted individuals and property developers to seek these loans even during tough economic times. The benefits of ijara loans for the real estate sector stem from multiple fronts. A study of the benefits of ijara loans for the real estate sector from the various angles is integral in order to appreciate the unique features of ijara loans.

The Benefits of Ijara Loans for the Real Estate Sector—They Are Ethical

The benefits of ijara loans for the real estate sector from the standpoint of ethics arise from the unique working principles of these types of loans that are immersed in the rules of the Sharia.

The Sharia is a body of Islamic rules and regulations that dictate the codes of conduct for practicing Muslims all over the world, in both their personal and professional lives. All forms of Islamic financial methods are based on the rules of the Sharia and ijara loans are no different. The benefits of ijara loans for the real estate sector from the ethical perspective and as arising from being rooted in traditional Islamic laws can be appreciated only after gaining a fair understanding of the Sharia laws governing financial and business practices.

The following are some of the principal Sharia rules:

  • Charging and receiving interest as part of the financial transaction are strictly prohibited.
  • Financial transactions that involve speculations or extreme risks are prohibited. Speculating is considered gambling, which is an unlawful activity according to the Sharia.
  • Financial contracts should strictly spell out the terms, conditions, rights, obligations, and promises binding on all the parties who have entered into the agreement. Any violation of this rule is considered as engaging in risky behavior and goes against the founding principles of the Sharia—justice and partnership.

An analysis of the above Sharia rules makes it clear why individuals who wish to buy a house prefer ijara loans to conventional forms of interest-based loans. The real estate sector has received a definite fillip with the influx of ijara loans by enabling an increasing amount of practicing Muslims to buy property while staying true to their religious beliefs. The benefits of ijara loans for the real estate sector are thus readily discernible.

The Benefits of Ijara Loans for the Real Estate Sector—They are Transparent

Being rooted in the concrete Sharia rules for financial transactions, ijara loans are widely perceived to be immensely transparent. Some of the most critical benefits of ijara loans for the real estate sector stem from this belief. And rightly so.

The ijara contract specifies all the terms and conditions binding on both the lessor and the lessee including the amount of rental payment to be made at periodic intervals. This transparency attracts not only Muslims but also people from other faiths to seek these loans to fulfill their cherished dream of owning a house. In fact, it is this transparency that had prompted many individuals to register for these loans even during this ongoing recession. The benefits of ijara loans for the real estate sector in this regard have even been able to counter tough and turbulent economic times.

The Benefits of Ijara Loans for the Real Estate Sector—They are Viable

There are also other benefits of ijara loans for the real estate sector and probably one of the most important is the economic feasibility of these loans. It is a cash-strapped individual who seeks these loans, that is a person, who is unable to buy the property outright. Ijara loans enable him to enjoy the benefits from using the property by only paying a fixed rental amount at pre-determined intervals of time. At the end of the leasing period and after he has made all the rental payments, the lessee has the option of having the right of ownership of the property transferred to him.

These benefits of ijara loans for the real estate sector show how they have enriched the housing sector and go on to prove why the popularity of this type of loan has been increasing throughout the years.