The latest federal budget from Justin Trudeau’s Liberals has sparked discussion with its proposal to explore new avenues for expanding home ownership, notably through the introduction of “halal mortgages” for Muslims in Canada.
Adhering to Islamic principles, these mortgages aim to explore “new measures to expand access to alternative financing products, like halal mortgage”, while respecting Sharia law, which prohibits the charging of interest.
What is a ‘halal mortgage’?
The capitalization of interest lacks the spirit behind the Islamic faith, and thus, any gains that you may have made via interest are not fair as per the Sharia law. A “halal mortgage” still enables the lender to generate profit, through a different set of terms that includes charging the person a higher overall price for a home (adding a future gain in the selling price). An alternative model can involve a rent-to-own or even establishing a partnership between the lender and the homeowner that gradually reverts the control to the latter with the house payments.
Why the need for a ‘halal mortgage’?
Mohamad Sawwaf, CEO of Toronto Islamic financial institution Manzil, told CTV News, “The process and documentation is what makes the transaction halal.”
The possible revisions in the federal budget can consist “in the tax treatment of these products or a new regulatory sandbox for financial service providers.”
With Muslims representing almost 5% of Canada’s population and growing since 2001, there is a recognized need to address their specific financial requirements.
The proposal has elicited mixed reactions from Canadians, with some expressing confusion and scepticism on social media.
Several people say that the presence of “halal mortgages” in the budget is a recruitable step for the Liberals to gather votes, meanwhile others express their doubt if the regulations should belong to the stricture of Shariah law in a secular country like Canada.
One Redditor posted, “Bigotry aside, these are just fixed rate mortgages with mental gymnastics to fool God.”
“Nothing more than pandering by the Liberal government,” one said on X (formerly Twitter).
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While slamming House of Commons, Liberal MP Iqra Khalid points out “how federal policies can protect Canadians from abuses”. At the same time, Bloc Quebecois MPs raise concerns about “why halal mortgages are included in the budget.”
Bloc MP Martin Champoux asked, “Why do they want to introduce elements of sharia law into the mortgage rules of this so-called secular country?”
Trudeau is planning to build 3.9 million homes by 2031
Advocates for halal mortgages stress the importance of intervention to address disparities in rates compared to conventional mortgages, with hopes that increased access and competition will lead to lower rates for Muslim homebuyers.
Zuhair Naqvi, founder of Eqraz based in Oakville, Ontario, highlights, “Canada is about 20 years behind on Islamic finance compared to other developed countries like the U.S. and U.K.”
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Amidst challenges in the housing market and pressure to increase homeownership, Trudeau’s government has pledged to build nearly four million homes by 2031. “It’s a plan to build housing, including for renters, on a scale not seen in generations. We’re talking about almost 3.9 million homes by 2031,” Trudeau announced.
