Praise be to Allah.
The basic principle with regard to the muhrim is that he may wear whatever he likes, except that which is clearly stated is not allowed, which is that which is tailored to the size of any limb or part of his body, or the shape of the entire body, which is what is described in the books of fiqh as “stitched clothing”. Similarly, the muhrim should not wear any clothing that is perfumed, because when the Prophet (peace and blessings of Allaah be upon him) was asked about what the muhrim should wear, he mentioned what he should not wear.
It was narrated from Ibn ‘Umar (may Allaah be pleased with him) that a man said: O Messenger of Allaah, what clothes may the muhrim (pilgrim in ihraam) wear? The Messenger of Allaah (peace and blessings of Allaah be upon him) said: “The muhrim should not wear shirts, trousers, burnouses or khufoof, except for one who cannot find sandals, in which case he may wear khufoof but he should cut them (so that they come) lower than the ankles. And do not wear any clothes that have been dyed with saffron or wars.”
Narrated by al-Bukhaari (5458) and Muslim (1177).
The burnous is a garment with an attached hood that covers the head.
Wars is a plant that produces a yellow dye and has a pleasant fragrance.
Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) said:
“Stitched garments” according to the fuqaha’ includes everything that is tailored to the size or shape of a limb, or the entire body, such as shirts, trousers, jubbahs and vests, etc. It does not refer to that which has stitching in it, rather if it is something that may be worn in ihraam, one may wear it even if there is stitching on it.
Al-Sharh al-Mumti’ (7/126).
And he said:
If it is worn in the usual manner, then this is not allowed, meaning that if he merely puts it on him, there is nothing wrong with that, i.e., if he puts a shirt on his body (i.e., putting it over his shoulders), then that does not matter, because he is not wearing it as such.
The evidence for that is the hadeeth of ‘Abd-Allaah ibn ‘Umar ibn al-Khattaab (may Allaah be pleased with them both), according to which the Prophet (peace and blessings of Allaah be upon him) was asked what the muhrim should wear, and he said: “He should not wear a shirt, trousers, a burnous, a turban or khufoof.” He mentioned five things that should not be worn, even though he was asked what should be worn, and he answered with what should not be worn. What this means is that the muhrim may wear anything other than these five things. He only mentioned what should not be worn instead of what may be worn because what should not be worn is less than what may be worn.
Al-Sharh al-Mumti’ (7/126, 17).
Is seems that there is nothing wrong with the piece of cloth that is wrapped around the body to cover the ‘awrah area, rather that is permissible, because what is not allowed is to wear trousers, and similarly what is not allowed is to wear regular underwear, which is the underwear that people wear, unlike the piece of cloth mentioned in the question, so it is like the izaar which is wrapped around the body, and it is not tailored to the size of the body.
Shaykh Muhammad ibn Saalih al-‘Uthaymeen (may Allaah have mercy on him) said:
The Messenger (peace and blessings of Allaah be upon him) listed a number of things that are haraam, so whatever is similar we add to that, and whatever is not similar we do not add to it. Whatever we are uncertain about, the basic principle is that it is permissible. One of the things we are uncertain about is the sewn lower garment (izaar). Some people wear a sewn izaar, i.e., one that does not open, then they wrap it over their bodies and tie it with a rope. Do we say that this is permissible, or that it is like a shirt or trousers?
We say that it is permissible, because it does not resemble a shirt or trousers, because trousers have legs, and the shirt is worn on the upper body, and the shirt has arms. Thus it does not resemble trousers or a shirt, so there is nothing wrong with it. It is used by some people nowadays because it is less likely to show the ‘awrah, so we say: so long as it is called an izaar, it is an izaar, so it is permissible.
Al-Sharh al-Mumti’ (7/133, 134)
And Allaah knows best.