What is the ruling on borrowing half a million [currency unit] to buy an apartment, and mortgaging the property to the creditor in exchange for him waiving 50,0 of the interest-free loan if the borrower continues to work with him for two years? And is it permissible to pay a down payment or an increased amount to the property owner?

A qard hasan (benevolent loan) is commendable, and its reward is half that of charity. It is permissible to secure a loan with a formal or possessory pledge (rahn). However, the pledgee (murtaḥin) is not allowed to use the possessory pledge except for its fair market rent (ujrat al-mithl). It is forbidden to stipulate a commutative contract, such as a sale or a lease, within a loan agreement, because the Prophet (peace be upon him) forbade "a loan and a sale." Therefore, stipulating that the borrower work for free or for less than fair market wages in exchange for the loan is forbidden and a means to usury (riba). However, if the work is for fair market wages and without a prior condition, it is permissible.

Scholars have differed on the permissibility of repaying a loan with less than what was borrowed, and the more preponderant opinion is that it is permissible. If the lending involves stipulating a deduction from the loan in exchange for continued work, this is not permissible, because it is a condition for work within the loan. It must be clarified that the work will be done without any condition.

It is permissible to pay an earnest deposit (‘urbun) with the contract, but not with a mere promise. This is the view of the Hanbalis, and it means paying a portion of the price or rent after the contract, with an agreement that the amount paid will be counted towards the total if the transaction is completed. Otherwise, it is returned to the seller.

As for paying an amount exceeding half a million to the property owner without clarifying the reason, if the intention is to pay more than the real price and then reclaim the excess from the lender, this is falsehood and deceit and is not permissible.