One of the unique laws relating to walled cities is that a house that is sold can be “redeemed” – that is, repurchased – within a 12-month period. After that time it becomes the permanent possession of the purchaser and, in contrast with other real estate in Israel – will not be returned to the original owner at the beginning of the Jubilee year (see Vayikra25:29-31).
The Mishnah on today’s daf (=page) rules that such a house can be redeemed at any time during those 12 months, and that although doing so appears to be payment of interest – which is forbidden by the Torah – nevertheless it is not considered to be interest and is permitted.
The reason it appears to be payment of interest is because the seller will be returning the same amount of money to the purchaser as he originally paid (we assume that the value of real estate does not fluctuate, or that the halakhah requires that the redemption be done at the same value as the original payment price), and, in addition, the purchaser derived the benefit of living in the house for a period of time. Since the seller can always redeem the house, it appears that the purchaser “lent” money to the seller that was returned at a later time together with an additional benefit.
The Gemara quotes a baraita that states this law in a different manner. According to the baraita, redeeming a house in a walled city in this manner is an actual case of forbidden interest, but the Torah permits it in this unique case. In response, Rabbi Yohanan says that there is, in fact, a disagreement between Rabbi Yehudah and the Sages, and the Mishnah and baraita represent these two opinions. The Talmud Yerushalmi explains Rabbi Yehudah believes that this is a real case of interest, and the Sages argue that since this is done as a sale and not as a loan, it only has the appearance of forbidden interest, but is not truly a case of interest.