An Islamic reverse annuity mortgage in 2022 and 2023 is by definition the result of a halal real estate transaction which includes a life annuity sale contract, a Muslim person undertakes to sell his property to a Muslim buyer in exchange of a down-payment, called the “bouquet”, and regular cash payments for the rest of his life (life annuity) paid by the property buyer based on the principles of Islam.
The Islamic reverse annuity mortgage role is to allow the Muslim buyer to invest in real estate for much less while ensuring the financial security of the Muslim seller until the end of his life, in addition the seller continues to live in the house or his apartment for the rest of his life.
The halal viager (in French lifetime annuity property sale contract in favor of the seller) does exist and it is very popular in Muslim countries in Asia and which allows a Muslim and Muslim to become an owner easily, without having to advance too much money since when the property remains occupied the value of the purchase price is often 50% lower than the real price with, on the other hand, the payment of a pension which will depend on the lifetime of the seller.
The Islamic reverse annuity mortgage in 2022 and 2023 (in Arabic إيراد مدى الحياة) is not at all speculative since the same principle is applied for halal life insurance which is based on the probable life of the insured, concerning the life annuity, the seller knows in advance how much money he will receive and so does the buyer.
IS REVERSE ANNUITY MORTGAGE HALAL OR HARAM ? DOES VIAGER COMPLY WITH ISLAMIC SHARIA?
The reverse annuity mortgage is not haram in the case of the Muslim seller, because he knows in advance how much money he will receive through the bouquet (down-payment) and the life annuity, which is in accordance with Islamic sharia.
On the other hand, the sale in viager can be borderline haram concerning Islamic principles for the buyer, since the latter "hopes" that the seller will die as the statistics predict or even before.
The Muslim buyer, on the other hand, does not speculate either by buying a life annuity since the discount of the purchase price in relation to the market price is so high that even if the Muslim seller lives longer than "expected" he or she will gain in buying in viager.
There is an option to make viager halal as well is to opt for the “certainity viager” when the buyer pays the annuity for a given and limited period and cease at the end of this period, which eliminates the speculative element banned by Islamic finance.
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