"I am an Englishman born and bred, almost," declares Karim Amir at the opening of Hanif Kureishi's magnificent first, Whitbread Prize winning novel The Buddha of Suburbia. Shahid Hasan, the hero of this, his long-awaited second, could, despite both parents being Asian, almost be Karim's spiritual brother. Embraced at one point by an Asian Muslim as a "fellow countryman", he replies "Well...not quite." As a novel The Black Album is almost but not quite a companion piece to that first book.

It's 1989. The punk movement so lovingly detailed in Buddha has given over to Rave and a new kind of drug culture. Shahid has come up to study at a college in Kilburn, north London, where he quickly he falls in with a bunch of Islamic Fundamentalists centred on the would-be poet Riaz and his henchman Chad. Initially Shahid sees much to be admired in community self-help and the defence of families against racist attacks on a near-by estate. But like Karim, Shahid is torn between the traditionalism of "the brothers" and the thrilling possibilities offered by life in the big city. Like many others at the college he falls for the magnetism of the charismatic Deedee Osgood, but unlike them enters into an energetic affair with the older tutor, held against a background of E-fuelled Rave culture and athletic sex.

The first half of Kureishi's novel is tremendous. Best known as a scriptwriter (My Beautiful Laundrette, Sammy and Rosie Get Laid) his touch as a novelist is light but assured. His language crackles as much on the page as the screen - take for example Deedee's estranged Marxist-Leninist husband Dr Brownlow who has been "stuttering since Eastern Europe began collapsing." Both of his books are serious, funny; seriously funny. The real meat in this sandwich comes in the later pages. Here all the brothers' talk is of "that book" (Rushdie and The Satanic Verses are never mentioned by name) and darkness falls in the guise of a burning at the college and later a firebomb attack on a bookshop. Here, and through family pressure to take the place of his wayward junkie brother Chili, Shahid is finally forced to make choices.

The Black Album, like Buddha, is a book about someone finding their place in the world, making decisions for themselves. Shahid confesses near the beginning that he wanted to be a racist "like everyone else." He wanted to join the BNP ("I would have filled in the forms - if they have forms") to resolve his perceived identity crisis. He is, according to the author, "fucked up" and that forms the springboard for his joining the fundamentalists. But although he sympathises with their defence of Asian families, he finds their rejection of art ridiculous, particularly the Rushdie book and Shahid's love of Prince, which provides the novel with its title. "Like pornography," he ruminates, "religion couldn't admit the comic." Kureishi was among the first to spring to Rushdie's defence against the fatwa, but unlike his book, The Black Album is not a novel about religion but what is done in its name. Kureishi has some sympathy with the young Asians who have found pride in themselves and their communities through religion, but is in love with this splendidly depicted London of pubs and clubs and excitement. As a result what finally comes through this book, as it came through the last, is the writer's essential humanity. He draws his characters with love and gives them meaty, complex lives to lead. The books that result are among the very best, most genuinely engaging and entertaining that contemporary British fiction has to offer.