Crowdfunding to buy and sell house with profit

Jan 25, 2023 | Business & Trade


If I was to do a crowd-fund to buy a house to then flip and return the people their money with returns, would that be ok? So there is no need for mortgage – all cash buy etc..

Let’s say we buy a house for £300k, work on it and sell for lets say £350k, so the 50k profit shared among people..

Another example, if I ask them to invest in a business (not property) and I give them a rough figure of their return (example, they invest £10k and I promise them approx £1000 return within a agreed time frame or say 10%) is that permissible?


The above-mentioned crowdfunding arrangement can be permissible if executed in the correct manner.

There are a variety of ways a business venture of this type can be structured. Below are a few basic structures.

  1. Partnership – If you are also going to be investing money into the property then you and the remaining investors will form a partnership. For example, you can all agree to contribute a total of £350,000 to cover the cost of purchase, refurbishment and sale. You would need to determine a fixed percentage of profit share each partner would get. Hence, depending on how much profit was made the amount each investor would receive would vary. In shariʿah it is not permissible to fix a pre-determined figure as profits such as £1000. It is also impermissible to fix a return on investment, such as giving them 10% return on investment. The return has to be fixed according to the amount of profit made by the business venture or according to the amount of shares owned of the business.
  2. Mudarabah – This is where you do not invest any amount yourself, however, you manage an investment venture by collecting funds from investors, and arrange for the purchase, refurbishment and sale of the house. Again, like in the partnership scenario, the profit percentages would need to be determined from beforehand.
  3. Agency – This is where you take a fixed payment from the investors to invest their money. Regardless of how the business venture goes you will be paid for your time but cannot benefit from the profits of the business venture.

As mentioned above, whichever format is adopted, one would have to ensure that the investment is conducted in a shariʿah compliant manner fulfilling all the necessary conditions. We would advise reading through the sections of musharakah and mudarabah from Mufti Taqi’s book Introduction to Islamic Finance. If you require any further clarification afterwards you may submit another question.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel