Question
I would like some information from a Shar’ee perspective on the way of doing a musharakah which diminishes from the one share holder.
Basically one person is helping another buy a house / property or any expensive asset for that matter and the one share holder (owner) shall be paying rent to hos fellow share holder every month for the share owned by his partner. Also the 2nd share holders share diminishes by a certain amount every month due to what is paid to him.
Could Mufti Saheb kindly confirm if this method is permissible without doubt and if permissible, could we request you to please provide us with a detailed guideline on doing such kind of shirkat so as to avoid any Haraam dealins happening if one enters in to such an agreement.
Answer
The method of enacting a diminishing partnership is as follows; Zaid wants to purchase a house but only has 50% of the funds required to purchase the house. He therefore requests a friend Amr to purchase the house with him in a joint diminishing partnership which Amr agrees to. Both parties contribute 50% of the capital towards the purchase of the house and buy the house.
Now, Zaid rents Amr’s 50% of the house at a stipulated rental (for example, R3000.00) that will be paid to him every month. However, Zaid also saves money to purchase Amr’s portion of the house in portions gradually as he accumulates funds. When Zaid accumulates (not necessarily every month) a sufficient amount of funds to purchase for example 10% of Amr’s property, then both parties agree upon a price for the 10%. Zaid then purchases 10% of Amr’s portion thereby now attaining 60% ownership of the house, and Amr now owns 40% of the house. Amr may now adjust (reduce) the rental amount (to a rental which both parties agree upon) as Zaid is now occupying only 40% of the house.
This is the procedure to be followed in the remainder of the property until Zaid has attained 100% ownership of the property. This method is in order and permitted in Shariah.