[Chirine]

Salam alaykum,

I am currently in the process of acquiring commercial property in France through a vendor financing / seller credit arrangement (the payment is spread over 10 years). The purpose is to avoid conventional bank financing in order to avoid riba, as I have been advised that when there is no third-party lender involved, riba may be avoided.

However, in the seller’s proposed payment schedule, a percentage described as interest is applied to the sale price over time.

My questions are the following:

1. Does this percentage constitute riba, even though the financing is directly provided by the seller and not by a bank?
2. In order for the transaction to be Shariah-compliant, must the total deferred price be fixed and agreed upfront as a single sale price (e.g. similar to a murabaha-type structure), rather than separating a principal amount and an interest component?

I would appreciate any scholarly or practical insight, particularly from those familiar with Islamic finance structures applied in non-Islamic legal environments such as France.

Thank you in advance.

 

[AabiruSabeel]

Wa Alaikum Assalam

Welcome to Islamic Board and Ramadhan Mubarak.

In order for the transaction to be Shariah-compliant, must the total deferred price be fixed and agreed upfront as a single sale price (e.g. similar to a murabaha-type structure), rather than separating a principal amount and an interest component?

Yes in general, but consult a scholar with the complete contract details. We do not have scholars on board who can reply directly here.