What is the ruling on a contractor building a residential villa on land owned by an individual, then the contractor mortgages this land in his name, and after completion, the bank buys it from the contractor for the landowner to pay him in installments, knowing that the agreement is not binding on the landowner and can be revoked by merely returning the value of the land?

It is permissible for a landowner to agree with a contractor to build a villa according to specific specifications. This is considered a binding Istisna' (manufacturing contract). It is permissible to mortgage the land to the contractor against his debt. The building is the property of the landowner, so it is not permissible for the bank to buy the building from him via Murabaha because it is a forbidden stratagem to obtain an interest-based loan.

If the contractor is to build the villa for his own benefit such that they become partners, then neither party may commit to buying the other's share at its value when the partnership is established. Rather, the sale must be at the market value on the day of sale.

If the building is the property of the contractor, it is permissible for the landowner to approach the bank to buy only the building, and then sell it to him via Murabaha. It is also permissible for the bank to purchase the entire house if the value of the land is less than half the value of the house.