Property Development under Shari’ah Principles

By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542

BACKGROUND

Property development and economic growth in developing countries go hand-in-hand. That is why there is a clear connection between a high rate of property development and a good economy. It normally forms a major component of the economy.

Furthermore, it is also a major contribution to employment and a catalyst for other business activities. It provides job opportunities to professional such as planners, architect, surveyors, engineers, lawyers and to non-professional alike such as skill and un-skill workers.

A large portion of national wealth is property based and the well-being of the property market tends to follow the economic cycles. Thus, when there is an economic downturn, the property sector will be worst hit.

In Islamic property development, the interest of the community are of utmost consideration whereby, social, moral and the human aspects of growth are more important than the physical and material aspects because they form the essential ingredients for enduring human happiness and social harmony.

Property development is usually associated with development in residential, industrial, commercial sectors, such as houses, shopping complexes and shop houses, factories and holiday resort et cetera. However, housing or residential development makes up the main component of property development.

The requirement for shelter or housing has been universally recognized as a basic need. It plays an important role in protecting human and promoting good health. In term of economy, housing can be considered as an investment. In term of social and politic, housing bestow dignity upon human and contributes significantly to the stability of any government.

Existing Planning of Property Development

Existing property development pattern depends mainly on the needs and demands of the community. These include providing sufficient housing for the people from all lifestyles. Consideration of development normally depend on the government’s as well as the developer’s requirement.

A community is made up of individuals with different needs. However, some basic needs are common to all such as fresh air, clean water, recreation space, sanitation, access to services and so on. Thus planning is necessary to ensure these basic needs are met and for the community services to be used effectively and equitably.

In order to ensure all these needs are taken into consideration, the existing property development process follows guidelines set by the Government and controlled through various laws and acts. The Town and Country Planning Act, National Land Code, Land Conservation Act, Drainage and other related legislation to name a few.

A planning authority which may be the municipalities or the State Government, are the enforcement bodies that ensure the developers comply with these guidelines prior and during all stages of a development project.

In an economic and social environment characterised by rapid change, the needs, and demands of the society has a major effect on the property development. The government’s strategic land use planning is based on the analysis of issues and trend that are being monitored and reviewed regularly.

The needs for an integrated and uniform development among the states, requires a comprehensive planning at the national level and the laying down of planning policies. Based on the national planning, each state is to ensure that its development is in line with this planning.

The National Development policy requires any development shall comprised of 30% for low cost houses, 40% for other types of residential, and 30% for utility and recreation.

Development Players

Property developers, professional consultant and bankers, are the ones who play an important role in property development. Presently the process of property development from the initial stage up to transaction stage followed commercial principles. Therefore, market forces and demands become an essential part of the feasibility study for any property development.

For the players, the main idea is maximizing profit by maximum utilization of space and materials. Although they are entitled to their profit, Islam does not accept profit maximisation. However, their right to actively participate in the economy and earn a decent income is important in Islam. The Prophet s.a.w said: “Next to obligatory prayers it is obligation of earning an honest living”.

Present Planning Design and Layout

Layout plans are prepared prior the approval of development projects. Based on the shape of the land, plans are prepared in order to achieve maximum utilization of space. The developer will usually comply with the basic requirement and regulation to maximize profit.

The planning design and layout of property development is based on the creativity of the architects and planners as long as it abides by the guidelines and rules set by the responsible authority and in accordance with the law. However, the flexibility is bound by the budget limit set for each building. As such, a low cost housing tends to provide the minimum facilities, as the cost limit is low, that is around RM25, 000.

The design of low-cost house comprised of only two bedrooms, a small living and kitchen areas in order to maximise the profit. In the case of low-cost flats are even worse because the family activities are bound within the boundaries of the unit’s walls.

Flaws in Present Property Development

Development is important for the country’s economy but when greed, money, and profit become the utmost importance, it can overrule the rest! Only dignity, sincerity, personal conscious and the commitment to give the best to others can perhaps help prevent the flaws in the system.

The society hoped the Government would address the problems that arise from the weakness of the present property development. Tightening of laws and regulations would be ineffective. How tight the laws are, most developers would still be able to find the loopholes and means to manipulate them. Furthermore tightening of laws would made business activities more difficult and thus encourage corruption.

Taking the case of highland development as an example, although there are laws to control such development, yet something or someone overrules it. The toll due to landslides and collapse of high-rise building built on slopes has created doubts among the public on the transparency of the enforcement of such laws.

The death toll from High Land Towers tragedy is still fresh in our mind and yet before the case is settled in court, another tragedy struck whereby the house of a prominent person was buried under a landslide whereby killing seven people in it. These tragedies show something is not right.

Limited rooms and congested area in low-cost dwellings reduced the privacy of the occupants. Thus, the young ones tend to hang out in order to find relief from such environment, which in turn can lead to social problems. The flaws in the design contribute to the decline in the educational development of the children, as the congestive environment is not conducive for learning. Besides, the rise in incest problems is of alarming rate because children of different sexes have to share the same bedroom.

Normally the developer will only follow the basic requirement with minimum regards to the environment. Allocation of community facilities are of minimum importance unless it becomes a selling point in the project, which normally caters for the higher income group.

Islamic Property Development

The Islamic property development is different from the existing development, whereby, it shall be based on the requirement of basic human life or ad-Deen. In Islam, human beings should not only be paid according to their skill or production capabilities but also their need to enjoy basic necessities of life.

Although there is no clear-cut or specific Islamic property development guideline, however, the Koran and Hadith provide the indirect guidelines that can be used in the planning and property development. Islam advocate that children of different sexes should have separate rooms and children above ten years of ages should sleep separately from their parents (Hadith as narrated by Abu Daud).

Indeed Islam encourages the most appropriate use of the land. It is also concerned with improving the quality of the environment by protecting the best, improving the worst, and planning for the future.

Considering these, Islamic property development is designed based on these indirect guidelines and Islamic values of human relationship, or better known as Syariah. Syariah, which is an Arabic word, that means “Path to be followed” that is either Islamic Law or Jurisprudence or in better term Islamic Ideology.

Principal of Islamic Development

The main principle of Islamic development is to achieve a proper balance between materialism and spiritualism, and between economic and social objectives that can be summarized into four relationships. The first is the relationship between man and the creator (Allah s.a.w) or Hablum minallah. Second is the relationship between man and man (Hablum minannas). Third is the relationship between man and the surrounding or the environment (Hablum minalmakhluk). The final relationship that is relevant in the modern era that is man and technology.

For the implementation of Islamic property development, the Islamization of all aspect of multidiscipline, education, financial and economy, social, political and community must be taken into consideration.

Relationship between Man and the Creator

In the eagerness for rapid physical development, every human must remember his or her Creator. This relationship becomes the main focus of all daily activities which in turn makes one becomes more pious to Allah s.w.t. The mosque becomes the symbolic focal point of the area where the rest of the development is focused and oriented to it.

This kind of development is planned in such a way so that the mosque becomes the congregation point for the community. The main aim is to instil good relationship and harmonious living environment and this makes the community in an Islamic city feels closer to the Creator.

Relationship between Man and Man

Man can never exist alone and Islam promotes the planning and sharing of facilities among the community . The planning development should take into consideration aspects that can create a total living condition as well as instilling good neighbourhood spirit and relationship among all members of the community. The neighbourhood is designed to ensure the community interact effectively through daily activities while sharing the communal facilities provided.

Relationship between Man and the Environment

Man has been demanded to take good care of the environment and the natural resources provided by the Creator for a more comfortable living. In this case, the development must ensure the landscape element especially trees and plants are planted. The principle is to achieve a harmonious and balance between natural and built environment.

All natural features such as big trees, river, watercourses, and unique attributes of the site should be preserved and used to enhance the planning of the site. Besides, the natural environment can indirectly boost the quality living of the occupants. The natural beauty of the environment and unique esthetical values can instil the growth of orderly, peaceful, and harmonious living. Indirectly it plays a part in increasing the peoples’ living standards as well as their soul’s peace.

Relationship between Man and Technology

Science and technology forms an important element in the development of a nation. Without technology, a country will be left behind and thus undeveloped. Thus, Islamic development must incorporate technology in its planning such as the design of intelligent building complete with modern cyber facilities and internet ready. Modern facilities such as the public transportation system not only reduced congestion but also create opportunities for the people to interact with each other.

Islamic Financing

The project financing will be using Islamic or Syariah facilities such as end-financing for buying properties or term-loan for the developers. There are various Islamic banking facilities available for potential property buyers such as Bay’ Bithaman al-Ajil or Long-term deferred payment, al-Murabahah (Short-term deferred payment), or al-Ijarah, al-Qardh, al-Rahnu for Leasing, Loan and Mortgage respectively and al-‘Aqd or Contract.

For the developers, the facilities are similar to the property buyers except for two additional, al-Musharakah or Partnership in development and al-Mudharabah (Profits & Loss sharing). Fortunately, in Malaysia not only we have Islamic Banks but there are also other commercial banks and financial institutions offering Islamic products.

Takaful or Islamic Insurance should be used for all aspect of the development including for purchasing equipment, machinery, and other material. All property transaction or dealings should follow the guidelines of Syariah that is transparent and are above board. For every dealing, the element of honesty and truthfulness are essential. The Prophet s.a.w has prohibited fraudulent and ambiguous dealing: “He who deceives is not one of my people” (Muslim).

Property Dealings

For property dealings, the National Land Code and the Syariah principle are almost similar. Under the code, the registered owner is allowed to transfer (either for a consideration or gratuitously); charge and lease property; and grant an easement in favour of the owner of adjoining land.

Under the Syariah, the corresponding dealing are hibah (gratuitous transfer); rahn (charges or pledges), ijarah (lease, tenancies, hire), or a’riyat (gratuitous lease); and irtifaq (extending beyond easement) or shufa’ah (pre-emption). A registered owner also have the right to transfer his property to his heirs upon death or faraid, wills or wasiat and transfer to trustee or waqf under thee code and Syariah respectively.

Proposed Planning & Design of Islamic Development Layout

The planning and design layout of Islamic development is a centralize concept with a regards to the direction of Kiblat. For Muslims the direction of Kiblat is important for their prayers and everyday chores and life style. For an area of flat and undulating terrain, a grid-iron pattern is most suitable.

The Kiblat-orientated-iron-grid-pattern made planning of the whole neighbourhood area right up to the planning of individual houses easier. This pattern however produces regular shaped lots and ensures a high level of street interconnectivity to facilitate movement. However, it is not suitable for the modern era especially in an area with heavy motorised traffic.

For hilly area, a different concept should be determined bearing in mind the direction of Kiblat, the need of the society to interact and share communal facilities. One of the suggestions is to locate the mosque in the centre of the valley surrounded by commercial centres like Masjidi Al-Haram in Makkah. However, the location of the mosque should always be at the focal point and if possible surrounded by a beautiful environment.

Figure 1.0: Grid-Iron Pattern of Property Development

Planning of Regional Area

The mosque and religious centres are the focal point surrounded by regional commercial centres and community facilities. The regional community facilities include among others secondary school, public library, hospital, and major recreational facilities. The regional commercial centre on the other hand is intended to accommodate major shopping and office complex.

The regional centre is surrounded by neighbourhood parcels where residential areas are located. The regional centre is within convenient travelling distances for the neighbourhood resident.

Figure 2.0: Mosque as the focal point of the Regional Area

Planning of Neighborhood Parcel

Each neighbourhood parcel planning should be a multi-disciplinary task and the planning parameters are determined by analysis of site features such as its topography, and types, styles and demand of the houses. Each neighbourhood parcel has a different residential density that represents the type of houses.

For each neighbourhood, the local community facilities such as primary school, recreational areas, and neighbourhood shops as the focal point. The distance to this focal point is within walking distance by the resident.

The neighbourhood shops provide local convenient shopping facilities and other services that cater for day-to-day needs of the resident in the neighbourhood.

Figure 3.0: Communities Facilities and shops as focal point of the Neighbourhood Area

Planning and Design of Building

In the design of a house, the direction of bedrooms and toilets are designed with consideration to the direction of the Kiblat. For Muslims, it is not right to face the direction of Kiblat while easing oneself. The design of bedrooms depends on the several factors. Sons and daughters have to be allocated different bedrooms and there should be a separate bedroom for the parents.

Commercial and office complex, and shopping centres must include separate praying rooms complete with attached ablution facilities. These rooms have to be planned for its purpose and not just to convert any rooms into praying rooms as what been practising now.

Towards Shari’ah Property Development

The successful implementation of Syariah property development in Malaysia largely depends on the initiative and support of the government. The normal technique for property development is for the developers to build on its ‘own land’ within permitted planning standards and development guidelines. In this context, ‘own land’ means their rightful land or any land they have right to develop.

However, as land tend to have various sizes and shapes, and for Syariah property development to be successful, land readjustment has to be introduced. Land readjustment is the re-plotting of the boundaries of a number of contiguous lots. By this way, the proposed layout does not have to follow the existing shapes of the lot and thus, maximisation of spaces based on the lots be avoided.

The government should lead the Syariah property development through its agencies such as the State Economic Development Corporation (SEDC), State Islamic Economic Development Corporation (SIEDC), Regional Authorities such as DARA, KETENGAH, or UDA, Local Authority such as the City Hall or Town Municipalities Board and other government agencies such as Syarikat Perumahan Pegawai Kerajaan (SPPK).

In order to create awareness of Syariah Property Development, the public should be informed to the principles and benefits of such system. These can be achieved using proper marketing strategies, mass media and through educational means.

By creating a model project as an example, the public will be able to comprehend the Islamic way of property development. The government can benefit directly and indirectly from foreign exchange by promoting foreign ownership of property. An incentive similar to the silver-hair programme can attract foreign buyers. In fact, the government can go one-step further by developing Islamic holiday or health resort, which can attract foreign tourist especially Muslim tourist.

Conclusion

First and foremost not all project developed by the present conventional way are successful and resulted with abandon projects. Even though most of the developers are laughing all the way to the banks, there are some developers have difficulty making ends meet. History shows that some of the developments have been exploited, which contributed to slope failure, muddy floodwater and landslide. Indeed some property developments are known to severely harm coastal resources and ecology.

In contrast, by developing properties by Syariah way, we can truly realize a development that is serene and kind to the environment. In addition all transactions are Halal and thus eliminating any form of Riba’. Most of all, we can educate the public to be a better Ummah and proves that Islam is a way of life, that is beneficial in all aspect. Most significantly, we are creating an Islamic environment where human beings are made to feel closer to his creator. By doing so, we can help eradicate poverty as Islam stipulate obligatory Zakat and encourage charity. Indirectly we can instil fear of Allah (s.w.t) that can help eliminate crime and reduce social ills.

Nevertheless, before any of this can take place, a radical step to formulate the existing Town Planning Guidelines to be in accordance the Islamic development principles is required. Fortunately, the provision in the National Land Code is almost consistent with Islamic development except for few minor items. For instance, any amendment to the code should include provision for Land Readjustment.

Furthermore, in this era all over the world, man are now becoming more conscious to the environment and thus, the relationship fundamental between man and man, between man and the environment, and between man and technology is now a norm in many planning standard. Therefore, only the element, the relationship between man and his creator is to be institute to make Islamic development a reality.

The Kiblat orientated grid-iron methodology can be used as a base plan for development. However, the concept should be modified to suit local environment and situation, and site condition and topography. Even so, a firm and strong support from the government is required for the Islamisation of the other aspect of physical development especially in the area of politic.

Lastly but not least, even though we might fail in making money from the project, we can of course be rewarded in the Hereafter. Muslims have an obligation to undertake all economic activities with the aim of obtaining Allah’s blessing and in this way able to truly and sincerely serve humanity. It is actually a fard-kifayah demanded to Muslim. The Prophet reminded: “A Muslim who likes to do good deeds in this world will be fully recognised in the Hereafter and will be given special preferences to go to heaven” (Al-Tabrani).