Trudeau announces halal mortgages to help Muslim Canadians get onto property market
- The plan aims to support 'diverse' communities with support for Islamic finance
- Islamic law bans the charging interest because it is viewed as exploitative
- Sharia loans are already widespread but Canada is set to offer state support
Justin Trudeau is set to introduce 'halal mortgages' in a bid to help Canadian Muslims onto the property market.
The plan, announced in the 2024 federal budget, aims to support 'diverse communities' with support for alternative financing.
Islamic law, or Sharia, prohibits Muslims from charging or receiving interest because it is viewed as exploitative and immoral.
So instead of providing loans, Islamic banks used different payment structures to facilitate home ownership.
The practice is already widespread across the western world, but Canada's Liberal government is set to be the first in North America to provide state support for the concept.
Justin Trudeau is set to introduce 'halal mortgages' in a bid to help Canadian Muslims onto the property market
Islamic law, or Sharia, prohibits Muslims from charging or receiving interest because it is viewed as exploitative and immoral
Ottawa is 'exploring' measures that could change 'the tax treatment of these products', with final details set to be announced this Fall.
'Halal mortgages' do not necessarily work out any cheaper for the buyer, as the interest that would have been paid is usually structured in a different way.
Broadly speaking, the mortgage operates on a 'rent-to-own' model, in which the financier purchases the property and then sells it back to the homeowner at a higher price, although there are variations.
Some Sharia loans can in fact have significant drawbacks in that they either effectively render the buyer a tenant for the duration of the contract or saddles them with debt.
The payments are also often more expensive as they are considered more risky.
The Al Rayan Bank (formerly the Islamic Bank of Britain) is one of the fastest-growing banks in the UK and provides Sharia compliant financial services to more than 90,000 customers.
Islamic loans are also available from several US institutions, including the UIF Corporation, Guidance Residential and Lariba.
These loans are not limited to Muslims and can be accessed by 'anyone who is into a more transparent and ethical financial system', according to New York-based Islamic financial service provider Musaffa.
'Halal' mortgages are also offered by some smaller Canadian institutions, although none of the country's five biggest banks offer them.
Trudeau's plan seeks to change this.
'Canada is a country that celebrates diversity and inclusion. This new 'Halal Mortgage' program is a testament to our commitment to fostering an inclusive society where everyone has equal access to opportunities, including in the housing market,' the Prime Minister said in a statement.
The program will be administered by Canada Mortgage and Housing Corporation (CMHC) in cooperation with Islamic financial institutions.
CMHC will provide funding to Islamic banks and credit unions to offer 'halal mortgages' to eligible homebuyers.
Trudeau said the plan was 'a testament' to Canada's commitment 'to fostering an inclusive society where everyone has equal access to opportunities, including in the housing market'
The move has been welcomed by Muslim communities in Canada.
Farhat Rehman, President of the Canadian Islamic Congress, praised the government's initiative, stating, 'This is a historic moment for Muslims in Canada. The introduction of the 'Halal Mortgage' program will not only facilitate homeownership but also empower our community to participate more fully in the Canadian economy.'
There are typically three models of Sharia loans.
The first, known as Musharakah, sees the financier and buyer enter into a co-ownership agreement, in which the two parties invest in the home together.
The buyer then buys out the financier's stake over time, while paying a fee to live in the property while it is still co-owned.
A second arrangement, Ijara, has the financier purchase the property before the home buyer rents it under a lease-to-own arrangement.
Under the Murabaha model, the financier buys the home and sells it to the customer on a deferred basis at an agreed-upon profit.
https://www.dailymail.co.uk/news/article-13328417/Trudeau-announces-halal-mortgages-help-Muslim-Canadians-property-market.html
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