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Fatwa CenterThis transaction is Riba and not a lease agreement
Question
Assalam-alaikum, I am a resident of Karnataka, India now staying in Muscat for employment. I would like to take up a residence there on lease. A system is followed there whereby you can get a house on lease by paying a lumpsum amount for a period of agreed period and no rent is payable during this period. After the expiry of the leased period the premises will be handed over to the owner and the same lumpsum amount will be returned to us. The agreement can also be extended by mutual consent. Maintenance charges have to be paid for the apartment monthly. This system is widely practised there. Some Islamic scholars feel that this is not permitted in Islam and a certain amount is to be compulsorily paid as rent. Please give the Islamic ruling in this matter in the light of sunnah and Quran. Jazakallah,
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
This transaction is not permissible and it is not renting. In reality, the party which you described as the tenant lends an amount of money to the owner [landlord] and he will benefit from this lending that he will live in the house for that period (for free), and it is known that any loan that results in a benefit (to the lender) is Riba. For more benefit, please refer to Fataawa 90508 and 124875.
Allaah Knows best.
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