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The question Why is Murabaha not considered Riba? discusses the theoretical difference between Murabaha and riba. I would like to know if there is any practical difference. To be concrete, let's talk about some numbers.

There are two identical houses whose market price is 1000.

Ali buys house A using a usual mortgage: he borrows from the bank 1000 (with which he buys the house), then pays the bank 100 per year for 20 years. This is haram, because he pays 100% riba.

Bashir buys house B using Murabaha: the bank buys the house for 1000, then the bank sells the house to Bashir for 20 annual payments of 100. This is halal, because there is no loan here - only a profit on the house.

My question is: what happens in case of default? What happens if after, say, 8 years, they stop paying the annual payments?

Ali will probably be sued by the bank. Since the house is a collateral for the loan, the bank is allowed to grab the house and sell it in order to cover the remaining debt.

But what about Bashir? Bashir did not receive any loan from the bank. Actually, after 8 years of payment, Bashir owns 40% of the house while the bank owns 60% of it. The bank is not allowed to take Bashir's part because Bashir is not in debt. What, then, will the bank do in this case?

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maybe i can help a little, i work at one of islamic/syariah bank in indonesia. according to my associate, apart from reconstruction or rescheduling, in case of default, rather than

grab the house then sell it in order to cover the remaining debt

in other words, we (bank) could buy back the house and sell it (auction). then bashir get the 40% of it. all of this process should refer to approved akad. sorry bad english

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