Canada's leap towards inclusivity with halal mortgage initiative
28 April 2024 10:19
Halal mortgages, which avoid the interest forbidden in Islam, have been featured in Canada's federal budget proposal. This budget aims to facilitate the construction of approximately 10.2 million homes and flats by 2031 and includes support for halal loans as part of this effort.
The budget proposal, currently under discussion in Parliament, addresses the ongoing housing crisis. A subsection titled "halal mortgages", consisting of eight lines, has attracted attention from both Canadian and international media. The government in Ottawa plans to build an extra two million homes and flats on top of the 4.6 million scheduled for construction by 2031. Around three million out of the additional 4.9 million properties are expected to benefit from various forms of support, including making land available for social housing and innovative financing methods.
Halal loan without interest
According to the 2021 census, about 1.8 million residents of Canada, or 5%, are Muslims. A few lending companies offer halal loans, which are not found in the major Canadian banks.
The loans and insurance comparison site Rates.ca lists three companies providing halal loans: Canadian Halal Financial Corporation (CHFC), Eqraz, and Manzil. Rates.ca highlights that instalment payments are fixed, leading to potentially higher loan costs and requiring larger down payments.
Canada interested in halal loans
In the coming weeks, the government will discuss this with experts, including representatives from lending companies, but it does not anticipate legislative changes. Instead, it aims to establish standards so that budget funds can support alternative financing methods.
Islam permits three types of loans in Canada. In "Ijara", the property is leased to the borrower until the final rent payment. In "murabaha", a lending company owns the property and sells it to the customer in instalments over 15 years. In "musharaka", the lender and borrower co-own the property, with the borrower buying out shares over a typical mortgage period of 25-30 years.
