Topics: Islamic Finance

Understanding the Permissibility of Land Mortgages in Islamic Finance

Is Mortgaging Land for a Loan Permissible in Islam? Key Insights on Riba

Question: If land is mortgaged in exchange for a loan, can the mortgagee benefit from it? Is it permissible to mortgage land for a fixed amount of money? In our case, six acres of land were mortgaged for a loan of seven lakhs, and the land was mortgaged for five years. Moreover, the mortgagee will benefit from the farming profits, and the landowner will not receive any money for five years. Is this arrangement permissible?

Answer: To understand this question, it is important first to understand the concepts of mortgage and loan.

Mortgage: To mortgage something means to pledge an item as collateral with the lender as a guarantee.

Loan: A loan refers to helping someone in need by lending them money without any financial benefit or interest in return.

Keeping these two points in mind, the answer is that when someone loans seven lakhs to another person, they are doing them a favor by providing the loan. The borrower, in turn, has mortgaged some land as a guarantee. 

In Islamic Sharia, it is not permissible for the mortgagee to benefit from the mortgaged land, as the Prophet Muhammad (peace be upon him) said, “Every loan that brings a benefit is interest.” (Although this hadith is weak, its meaning is correct.) 

In this case, the person is benefiting from the land in exchange for giving the loan, which is considered interest (riba), and it is impermissible. Many people in our society take advantage of mortgaged land in this way, which is not permissible in Sharia.

Therefore, this transaction is predetermined as an interest-based transaction. It is not an act of kindness by lending money but rather a pure interest-based deal, which is prohibited and haram.

Respondent: Sheikh Maqbool Ahmed Salafi Hafizahullah 

Jeddah Dawah Center, Saudi Arabia  

Interpreter: Hasan Fuzail

Author: IslamicHelper

IslamicHelper

Recent Articles

A Woman’s Home: The Islamic Place of Dignity & Peace

Delve into the profound Islamic wisdom behind why a woman's home is her ultimate sanctuary. This article explores the Quranic… Read More

1 week ago

Chastity Before Marriage in Islam

Explore the divine imperative of chastity in Islam, rooted in Quran and Sunnah, safeguarding dignity, family, and society from zina's… Read More

1 week ago

Islam’s Guide to Animal Kindness & Eco Responsibility

Discover Islam’s profound teachings on kindness to animals and environmental responsibility, rooted in Quranic principles and Prophetic traditions, promoting compassion… Read More

1 week ago

Backbiting & Lying in Islam: Quranic Warnings

Explore the clear Islamic definitions and prohibitions of backbiting (Gheebah), tale-bearing (Nameemah), and lying. This detailed explanation from Allamah Zayd… Read More

1 week ago

Women’s Role in Society’s Foundation

Explore how women, as mothers and wives, form the cornerstone of family and society through nurturing, harmony, and value instillation,… Read More

2 weeks ago

Spouses as Garments: Quran 2:187 Meaning

Discover the metaphor of spouses as garments in Quran 2:187, exploring protection, comfort, intimacy, and mutual rights for a blessed… Read More

2 weeks ago