NewsCanada embraces halal mortgages to boost home ownership and address housing crisis

Canada embraces halal mortgages to boost home ownership and address housing crisis

Justin Trudeau, Prime Minister of Canada
Justin Trudeau, Prime Minister of Canada
Images source: © Getty Images | David Kawai
5:47 AM EDT, April 28, 2024
Halal mortgages, which are compliant with Islamic law by avoiding the interest forbidden in Islam, have been highlighted in Canada's federal budget project. This initiative aims to support the construction of approximately 10.2 million homes and apartments by 2031, with halal financing playing a key role in this ambitious plan.

The budget, currently under review by Parliament, seeks to address the pressing housing crisis. A notable feature that has captured Canadian and international media attention is the provision for "halal mortgages," detailed in a brief eight-line subsection. The government in Ottawa projects the construction of an additional two million homes and apartments on top of the 4.6 million already planned for completion by 2031. Around 3 million of these additional properties are anticipated to benefit from various support measures, ranging from making land available for social housing to embracing alternative financing methods, including halal loans.

Halal Loan without Interest

According to the 2021 census, Muslims comprise about 5% of Canada's population, totaling around 1.8 million residents. Although major Canadian banks do not yet offer halal loans, several lending companies have stepped in to fill the gap.

Rates.ca, a leading Canadian loans and insurance comparison site, lists three companies that provide halal loans: Canadian Halal Financial Corporation (CHFC), Eqraz, and Manzil. The site highlights that these loans feature fixed installments, which might result in a slightly higher loan cost and require a larger down payment.

Thomas Lukaszuk, co-owner of CHFC and former Deputy Premier of Alberta, shared in an interview with PAP the significant role these loans play in allowing many Muslims to own homes rather than rent. He explained that halal financing extends beyond merely avoiding interest charges.

For example, CHFC's income, after expenses, must be reinvested in halal ventures. The company also adheres strictly to Islamic investment guidelines, avoiding borrowing from entities investing in non-halal sectors, such as alcohol production.

CHFC is certified as offering halal loans, with endorsements including a fatwa from Al-Azhar Al-Sharif, the premier Islamic law studies center based in Cairo. Lukaszuk detailed the extensive consultations with finance and Sharia law experts that led to their products complying with Canadian and Sharia laws.

Despite the adherence to Sharia, where a divorcing woman might not have rights to communal property, in Canada, women are entitled to 50% of real estate assets, a principle CHFC respects. Moreover, the corporation avoids offering loans that are considered risky under Canadian law, such as rent-to-own schemes where the borrower is not listed on the land registry during repayment.

Canada's Interest in Halal Loans

In the next few weeks, the government plans to consult with specialists, including representatives from lending companies, to explore halal financing further. While no legislative changes are currently planned, the aim is to develop standards allowing budget resources to support these alternative financing forms.
In Canada, three types of Islamic loans are recognized: "Ijara," a leasing arrangement until the borrower pays the final rent; "Murabaha," where the lending company owns the property and sells it in installments over 15 years; and "Musharaka," a partnership where the lender and borrower jointly own the property, with the borrower gradually buying out the lender's share over 25-30 years—the typical mortgage period.
This inclusion of halal mortgages in Canada's federal budget underlines the country's commitment to financial inclusivity and diverse housing solutions amidst a growing housing crisis.
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