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The 2024 federal finances says the Liberal authorities plans to introduce “halal mortgages” as a technique to improve access to home possession.
Here’s what “halal mortgage” means and what that effort may appear like:
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What does Canada’s 2024 finances say?
The plan mentions the creation of “alternative financing products, including halal mortgages” as a way to “enable Muslim Canadians, and other diverse communities, to further participate in the housing market.”
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Ottawa is “exploring” measures that would change “the tax treatment of these products” or present a “new regulatory sandbox for financial service providers,” it says.
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The authorities started consultations in March 2024 with monetary companies suppliers and “diverse communities” because it units out to broaden mortgage insurance policies to incorporate various financing, the finances provides. The Liberal authorities says it’ll make announcement detailing what such a plan would appear like this the autumn.
Why are common mortgages not thought of halal?
Islamic legislation, or Sharia, prohibits Muslims from charging or receiving curiosity as a result of they’re seen as exploitative and immoral. Instead of giving loans, Islamic banks use completely different fee constructions to keep away from charging curiosity.
What are halal mortgages?
Sharia-compliant mortgages embrace fee constructions that take curiosity out of the equation. There are three frequent sorts of halal mortgages: ijara, Musharaka, and Murabaha.
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Ijara is a rent-to-own mannequin by which a financial institution buys the asset and leases it again out to the client over a set interval. The funds go towards each the capital and supply a revenue for the monetary establishment.
Musharaka, a type of partnership with the financier, includes each events proudly owning the property till the fairness is regularly transferred and the partnership dissolves.
Murabaha is a credit score system by which the possession is instantly bought to the client, with income included within the ultimate supply. The purchaser’s credit score historical past, deposit and phrases of the settlement are factored in.
Because these constructions are thought of extra dangerous, they’re usually dearer than a standard curiosity mortgage. Canada’s massive banks don’t presently present halal mortgages, which the Liberal authorities hopes to vary. According to Canadian Press, lack of halal monetary choices have left many Muslims ready for smaller companies to permit them to make investments and purchase properties.
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