What is the ruling on obtaining a real estate loan in the following manner: the bank buys the land from the client at the market price of 500,000 Saudi Riyals, then the bank sells it to the client through an Ijarah contract (lease with promise to own) at the same price of the land plus profits at a rate of 2.5% over ten years?

The aforementioned contract, which involves selling land to a party affiliated with the bank, followed by the bank selling it to you through an Ijarah (lease) contract with a promise to transfer ownership, with a 2.5% increase on the original price, is a prohibited contract. This is because it is a stratagem to circumvent usury (riba). The intention behind it is to obtain a financial loan and repay it with an increase. The operation is a cash loan repaid with an increase, and the sale is fictitious.

Although this scenario may outwardly differ from the issue of inah (buy-back sale), it is similar to it in terms of prohibition, especially if there was prior collusion. "If it were the opposite of the inah issue without collusion: there are two narrations from Ahmad, which is that he sells it immediately and then buys it back from him for more on a deferred basis. As for with collusion, it is usury achieved through stratagem." The involvement of a third-party intermediary only worsens the matter, as it is an additional stratagem and does not remove the issue from the ruling of inah.

Similarly, the Ijarah muntahiyah bi al-tamleek (lease ending in ownership) system does not necessitate permissibility, because it is either a fictitious lease covering a subsequent sale, or it is similar to a bay al-wafa (sale with a right of redemption), which is a loan in exchange for a benefit. A resolution prohibiting it was issued by the Islamic Fiqh Academy.

This contract is prohibited, and it is not permissible to participate in it.