Is it a sin for me to build on a disputed land that the state previously owned, when its original owner refused compensation?

If the state confiscates land lawfully, the buyer may dispose of it as if it were owned by the seller, and is not obligated to pay anything to the original owner. However, it is more cautious not to buy such lands.

But if the confiscation was by usurpation (ghasb) and injustice, then it is not permissible for one who knows this to buy it. If the buyer does not know, he is obligated to hand it over to the true owner, and he may reclaim from the seller what he paid.

If the buyer builds on usurped land without his knowledge, the owner is not entitled to demolish the building; rather, he takes it for its value. This is the correct opinion from Imam Ahmad.