Analysis of Housing Finance Payment Plans on the Axis of Interest and Garar in Line with Islamic Finance Principles

Abstract

The paper titled "Analysis of Housing Finance Payment Plans in the Context of Interest and Uncertainty (Garar)" represents a study that examines housing finance payment plans within the framework of interest and the concept of uncertainty. Financing methods employed for housing acquisition can generally be categorized into loans obtained from financial institutions and payment plans offered by construction companies. Credit institutions are assessed in terms of interest, while payment plans provided by construction firms are evaluated based on the principle of uncertainty (garar). The significance of this paper lies in its assessment of the compatibility of housing finance payment plans with Islamic finance principles. In Islamic law, interest (riba) and uncertainty (garar) are considered prohibited, and efforts are made to establish a financial system that adheres to fair and permissible practices. This paper contributes to comprehending the Islamic finance perspective by evaluating the alignment of housing finance payment plans with these principles. The payment plans presented to buyers are marketed as being compliant with the criteria of being halal (permissible), caiz, and adhering to Islamic finance standards. In this context, it is believed that this paper will contribute to promoting literacy in Islamic finance. The main objective of this paper is to analyze housing finance payment plans in terms of interest and uncertainty and assess their adherence to Islamic finance principles. This evaluation encompasses determining whether these payment plans are halal or haram (forbidden) and whether they adhere to Islamic finance principles such as justice, transparency, and fairness. The methodology employed involves a detailed examination and analysis of housing finance payment plans. This entails evaluating factors such as interest rates, the level of uncertainty, hidden costs, and other financial details. Additionally, Islamic law and Islamic finance regulations are studied to assess conformity with Islamic finance principles. The analysis is conducted by considering various financing types, including conventional bank loans, savings-based payment plans, and alternative payment plans offered by Real Estate Investment Trusts (REITs) within the framework of Islamic finance criteria. The outcomes of this study demonstrate the extent to which housing finance payment plans align with Islamic finance principles concerning interest and uncertainty. The results identify to what degree payment plans adhere to Islamic finance principles, potential elements of non-compliance (haram), and alternative solutions. Accordingly, alternative models such as murabaha, teverruk, and musharakah-i mutanaqisa, which are employed in participatory banking, are recommended as substitutes for the interest-based debt system utilized by conventional banks. The study emphasizes an approach closer to the real economy through "participatory banking." Moreover, the study highlights that payment plans, particularly models linked to inflation or the dollar, presented by REITs cannot be considered permissible within the scope of uncertainty (garar). Instead, the study suggests opting for fixed payment plans with varying maturity periods, which are more in line with Islamic law.