Zakat on Residential Apartments
Keywords:Zakat, residential apartments, commercial merchandise
This study seeks to elucidate the position of the Islamic Shari`ah on the Zakat alms due upon residential apartments prepared for sale, whether they are under construction or are in the stage of marketing. And given that they are offered in the real estate market for purposes of sale and the earning of profit, they are essentially prepared for trading and investment, where the aim is trading, profit generation and financial gain, and hence the Islamic ruling in accordance with the Zakat (alms) prescribed on commercial merchandise is that Zakat payment is obligatory, and also insofar as the method of payment, the quorum and the obligatory amount.
The study reached a set of conclusions and findings, foremost of which:
- Investment housing projects whose aim is sale upon completion of construction are the most akin to commercial merchandise prepared for sale and hence the rules of Zakat (alms) on commercial merchandise are applicable.
The requirement of growth is not requisite to make the Zakat obligatory.
Zakat is obligatory for the investor in residential apartments whilst in the stage of construction and preparation, where he shall assess his project at a fair value while giving due regard to time and place, whilst merging it with what he owns in properties, and shall pay Zakat of 2.5%.
Marketing stage of the project, which are periods that vary from one project to the other, and are underpinned by the following possibilities or scenarios:
- Sale of the entire project immediately upon completion of construction, whereby the investor shall have succeeded in selling all the residential apartments, and shall make a determination of the profits earned, and then pay Zakat as he would pay Zakat on liquid assets i.e. 2.5%
- Selling only a portion of the project, while the remaining is not sold for a year or more, whereupon he shall calculate the profits earned on what has been sold, and add them to what he possesses in wealth, and shall also assess the market value of what has not been sold and pay 2.5% Zakat on it every year.
- In case the entire project is not sold for more than a year and then it is sold completely, in which case zakat is obligatory for all the years in which the project was not sold, and (2.5%) become payable and due.
Keywords: Zakat, Residential apartments, commercial merchandise.
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