Saturday, February 10, 2007

the business of hypocrisy


I finally got my name in the list of lands that are offered off to the nationals by the government. But I have a few concerns about this issue that I would like to share here.

But first, let me state the facts.

First of all; by Royal Decree, you are not allowed to sell off your land until two years have passed by of paying the amount to put the piece of land in your name. Secondly, most housing banks in the Sultanate of Oman have high interest rates that used to be 12% but are now on different sets of rates of 8%, 9%, and 11.5% per annum. Salaries have only been increased for those who work in the government sector whilst the private sector still has the same rates since the very first business established long back. Inflation in the Sultanate of Oman has risen up by 4% and as a result, the price of building raw material has increased to new heights affecting other businesses such as the grocery business; housing businesses; and petrol.

Taking this all into consideration; if I am about to get my piece of land after 2 years, and work on an average of 500 Omani Rials (about $175 US Dollars) and in need of a housing loan to that is on an average of 8% interest of, say, 40,000 Omani Rials ( around $13,920 US Dollars), then I would still end up paying back my loan after the day I die.

So the question here is, where exactly do we hold the line to credit and liability? And why should the national have to pay back interest on an amount that he borrowed years ago when he can barely pay up the amount itself?

There was a time back in the old Islamic empire when none of this existed. When none of these profitability schemes were existant - in fact, they were prohibited. Because of the mere fact that they asked for money over the actual loan that was asked for in the beginning.

The world turns one blind eye on the issue of interest which is also available in Islamic banks all over the Arab world but with one difference; it falls under the category of 'profitability' so as not to drive people from banking with it.

How hypocritical can we get?

3 comments:

DoTs... said...

1. congratulation .. you now have "a land of your own" ;)
2. i can't comment on the interest rate/profitability rate and the difference between.. i can see your point.. but again .. its a sensitive issue in tersm of knowing the exact differences..but one thing i know.. as much as they are similar.. there are certain differences.. people who studied islamic finance or banking would know better..
but i was thinking.. in such cases..probably we'd need something similar to Dr. Muhammad Yunus's "Garmeen Bank " but for real estate.. or a new mechanisim that can simplify life.. and at the same time minimize the amout to be paid by the investor..and increase its rate of return.. !!!

Per Your Request said...

I agree with you its interest whatever which way you call it.
FYI RO 500=$ 1300 and RO40k= $104K.

Sleepless In Muscat said...

DoTs...:

1) Thanks. ;o)

2) It was explained to me that there is actually no difference between the two except the name. That's all.

Per Your Request:

I've never been good with numbers. Sorry. :P