Canada’s Trudeau Introduces ‘Halal Mortgages’ To Increase Muslim’s Participation In Housing Market, Does Not Have To Pay Interest

The following report is by National Post:

Here’s what “halal mortgage” means and what that effort might look like.

What does Canada’s 2024 budget say?

The plan mentions the creation of “alternative financing products, including halal mortgages” as a means to “enable Muslim Canadians, and other diverse communities, to further participate in the housing market.”

Ottawa is “exploring” measures that could change “the tax treatment of these products” or provide a “new regulatory sandbox for financial service providers,” it says.

The government began consultations in March 2024 with financial services providers and “diverse communities” as it sets out to expand mortgage policies to include alternative financing, the budget adds. The Liberal government says it will make an announcement detailing what such a plan would look like this fall.

Why are regular mortgages not considered halal?

Islamic law, or Sharia, prohibits Muslims from charging or receiving interest because they are seen as exploitative and immoral. Instead of giving loans, Islamic banks use different payment structures to avoid charging interest.

What are halal mortgages?

Sharia-compliant mortgages include payment structures that take interest out of the equation. There are three common types of halal mortgages: ijara, Musharaka and Murabaha.

Ijara is a rent-to-own model in which a bank buys the asset and leases it back to the customer over a set period. The payments go toward the capital and provide a profit for the financial institution.

Musharaka, a form of partnership with the financier, involves both parties owning the property until the equity is gradually transferred and the partnership dissolves.

Murabaha is a credit system in which the ownership is immediately sold to the customer, with profits included in the final offer. The buyer’s credit history, deposit and terms of the agreement are factored in…