The Ruling on the Endowment of Buildings Which Were Built With Loans From the Property Development Fund
Question :
Is it permissible to endow buildings which were constructed with loans from the Property Development Fund, while they are still mortgaged to the Fund?
Answer:
There is disagreement on this question among the scholars, based upon another question, which is: Is a mortgage binding if the ownership of the item has not yet been transferred or not? So those who said that it is not binding except by possession, said that it is correct to give it as an endowment or dispose of it in any other way which entails transfer of ownership, due to its being a mortgaged property whose ownership has not been transferred.
Those who said that the mortgage is binding even if the borrower has not acquired it, they say that endowing it is not correct, nor disposal of it in any other way which entails transfer of its ownership.
Based upon this, it is more prudent not to endow it until the money for it has been paid to the bank, in order to avoid the disagreement of the scholars and to act in accordance with the noble Hadith:
"The Muslims must abide by their conditions (of purchase and sale)."
Source:
Ibn Baz
Fatawa Islamiyah, Vol. 5 Page 47
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