What is the ruling on a person agreeing with a contractor to purchase building materials on credit from specific stores, such that the contractor pays their price, and the owner pays the contractor a fixed monthly sum for the materials and the contractor's work?

It is not permissible to combine ijara (leasing/hiring) and qard (loan) in a single transaction (loan and sale) because the Prophet, peace and blessings be upon him, forbade it. This is considered unlawful and void by the majority of scholars because ijara is a sale of usufructs, and because it involves stipulating one contract within another, which invalidates it. Furthermore, stipulating a loan increases the price due to it, and this increase becomes a profit for the loan, which is forbidden riba (usury). Also, the contractor benefits from the work assigned to him and is given a larger wage, and every loan that draws a benefit is riba. The employer may agree with the contractor to build by istisna' (manufacturing contract), whereby the tools and materials are from the contractor in exchange for a known, installment-based sum.