فَفِي رَحْمَةِ اللَّهِ
“Then they shall be within God's mercy.”
In one rhetorical analysis of Qurʾān 3:107, “mercy” is understood as referring to Paradise, the place where divine mercy is manifest. An associated condition is thus named in order to indicate its location.
“Fal-yadʿu nādiyah” — a place is named and its occupants intended.
“Fa-fī raḥmat Allāh” — mercy is named and its locus of manifestation intended.
The relation concerns location and what is present or manifest within it. The direction of reference is what distinguishes the two uses.