Bay' al-Wafa’

Literally: loyalty (al-wafa') is the antonym of treachery. Technically: when a person in need of cash sells real estate or an asset on the condition that the seller be allowed to get the commodity back upon paying its price. It is also called a trust sale (bay' al-amanah), and the Shafi'is called it a returned mortgage (al-rahn almu'ad). Other names for it are permissible sale (al-bay' al-ja'iz), transactional sale (bay' al-mu'amalah), the sale of obedience (bay' al-ta'ah). Bay' al-wafa' is a defective sale according to the Malikis and Hanbalis and the early Hanafi and Shafi'i scholars. Some of the later Hanafi and Shafi'i scholars consider it permissible, and some said that it is, in fact, rahn (pawning) and takes its attendant rulings. The Islamic Fiqh Academy of the OIC issued a resolution declaring that the reality of this sale is that it is “a loan with added benefits”, so it is a ruse to circumvent the prohibition of riba. It is invalid according to the majority of the jurists; thus, it remains a prohibited contract. For further details see ISRA Compendium.

A Sale and Buyback Deal on Real Estate

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