Decoding Mayfair Residencia’s 13% Annual Return:
A Shariah-Compliant Investment Approach
Mayfair Residencia, a premier high-rise development on Canal Road, Lahore, is offering a unique Shariah-compliant investment model based on Istisna’, a widely recognized Islamic contract used for construction investment. The project is structured to attract both installment-based buyers and full upfront investors, ensuring compliance with Islamic finance principles while providing attractive returns.
Under the current investment model, buyers have two primary options:
a) Installment Plan: Customers can book an apartment by paying a down payment, with the remaining amount paid over a four-year installment period.
b) Full Upfront Payment Incentive: Customers who opt to pay the entire amount upfront are offered an annual return of 13% for the first three years. This return is paid monthly and serves as a financial incentive for early investors.
At the end of the four-year construction period, all buyers—whether they paid in installments or upfront—will receive full ownership of their respective apartments.
The Istisna’ Model
Istisna’ is a Shariah-compliant investment contract used specifically for manufacturing and construction projects, allowing buyers and sellers to enter into an agreement for the delivery of a specified asset at a future date. This contract enables a flexible payment structure, making it an ideal method for real estate investments like Mayfair Residencia.
In this model:
a) The developer (seller) agrees to construct and deliver the apartments within a four-year period.
b) The buyer commits to purchasing the property at an agreed price, which may be paid either in installments or as a full upfront payment.
c) Buyers who choose full upfront payment receive a financial incentive (13% annual return for 3 years) as part of the transaction, structured as a discounted purchase price rather than a fixed return, ensuring compliance with Islamic financial principles.
This structure ensures that buyers are investing in a real, tangible asset, rather than engaging in any riba-based (interest-bearing) transactions. The Istisna’ contract is widely recognized and approved by Islamic scholars and financial institutions, making it a secure and ethical approach to real estate investment.
Mayfair Residencia’s Model vs. Istisna’ Principles
The International Islamic Fiqh Academy and Shariah boards of Islamic banks permit Istisna’ contracts as long as:
a) The price and specifications of the property are fixed in advance.
b) The delivery time is agreed upon (in this case, four years).
c) Payments can be made upfront, in installments, or deferred.
How the Mayfair’s Annual Return is Structured to be Halal
To ensure compliance with these fatwas, the 13% return us structured as part of the purchase price discount, not an interest-based return. Here’s how it works:
Structured as a Purchase Price Adjustment (Discount):
In Islamic finance, offering a discount for full upfront payment is permissible as long as it is agreed upon in the contract. Instead of calling it a fixed return, Mayfair Residencia lowers the effective purchase price for upfront buyers by paying them in installments over three years.
This discounted structure ensures that buyers are not receiving a return on capital but rather a financial benefit in the form of a lower price.
Shariah Principles on Deferred Price & Payment Flexibility
Fatwas on Istisna’ contracts allow full payment, deferred payment, or payment in stages.
a) Buyers who opt for installments pay a higher effective price, while upfront buyers benefit from a lower effective price through scheduled returns.
b) This approach follows Islamic finance principles, where price differentiation based on payment mode is permitted.
Not a Riba-Based Guarantee
Riba (interest) arises when money generates money without asset-based risk or involvement.Here, the buyer is purchasing a real estate asset and simply receiving part of their payment back over time, effectively lowering the net purchase price.
Conclusion: How Mayfair Residencia’s Model Fits the Islamic Financial Model
Mayfair’s Istisna’ contract is valid, as it clearly defines price, delivery time, and asset specifications.The 13% return is structured as a purchase price adjustment (discount), making it permissible under Islamic finance. No element of riba is involved, as buyers receive real ownership of an asset, not a financial return on money.
