Because rental is a feasible housing option for those who cannot afford to buy, there is no legitimate reason to purchase a home with an interest-based loan. Invoking an exception because of “darura” (necessity) is a serious matter and should only occur under similar circumstances to those that would force someone to eat pork from fear of starvation.
While there is an element of subjectivity, the person who wishes to be truly observant should do everything possible to avoid interest-based loans and should exhaust all other alternatives before turning to them even in dire circumstances.
Rental While Purchasing
In the absence of true shariah-based installment plans, those who would like to own a home but cannot afford to do so on their own must find a program that allows them to rent while purchasing the home over time.
To ensure that such an arrangement does not turn into a cover for an interest-based loan, and in order to eliminate confusion, it is necessary to uncouple your identity as a homebuyer from that of a renter and to make sure that each identity is carrying its rights and responsibilities accordingly.
Renter's Rights and Responsibilities
As a renter, you should have the same rights and responsibilities as any other renter in similar conditions and geographic locale according to the shariah principle of “Urf” (custom) unless any portion of the local custom directly conflicts with shariah. As a renter, you should be responsible for paying the rent; in return, you should have the right to live in the home. You should be responsible for care of the property, and any damages not due to normal wear-and-tear; in turn, you should have the right to receive general property maintenance and repair like any other tenant.
The length of the rental contract should fall within the norms for your area, and it should provide for a natural termination of the contract within a reasonable period of time, just like any other tenant/landlord relationship. In short, it should be a real rental agreement with all of the rights and responsibilities normally associated with it, not a front to justify collecting money that would otherwise be considered interest payments on a loan.
Owner's Rights and Responsibilities
All legal and financial responsibilities related to the property, such as taxes, weather damage, loss in value, etc. should belong to the owner or owners. Likewise, any benefits, such as tax credit, home appreciation, warranty benefits, etc. should also belong to the owner or owners.
As a co-owner, you should have all the rights and responsibilities of a partner independent of your rental status. Your ownership share should come with a proportionate amount of rights and responsibilities for the property. As a partner in any enterprise, you should not be required to buy out your partner or partners, whether in one transaction or multiple smaller transactions, but should be able to choose if you want to engage in buying shares at a price that you both agree upon.