In a significant move to address the specific needs of the Muslim community and promote diversity in the housing market, the Canadian government has announced the introduction of halal mortgages. This initiative aims to expand access to financing alternatives and support the homeownership aspirations of diverse communities across the country.
Ban on Foreign Land Ownership
As part of its annual budget, the Canadian government has implemented a two-year ban on foreigners from buying land in the country. This measure is designed to stabilize the housing market and prioritize domestic ownership, aligning with the government’s commitment to fostering diversity and inclusivity.
Read More: PIA air hostess detained in Canada for carrying passports of unrelated people
Government’s Commitment to Alternative Financing
The federal budget for 2024 highlights the government’s dedication to creating alternative financing products. Among these initiatives is the introduction of halal mortgages, which will enable Muslim Canadians and other diverse communities to participate more fully in homeownership. This demonstrates a proactive approach to addressing the specific needs of various demographic groups in the housing sector.
Engagement with Financial Service Provider
The government outlines its intention to engage with financial services providers and various communities to understand how federal policies can be improved to better accommodate Canadians seeking homes. Consultations commenced in March 2024, with a focus on exploring changes in the tax treatment of halal mortgage products and establishing a regulatory sandbox for financial service providers.
Balancing Access and Consumer Protections
A key priority for the government is to strike a balance between facilitating access to alternative financing options and ensuring robust consumer protections. While halal mortgages offer a viable alternative to traditional interest-based loans, they often come at a higher cost. The government aims to address this disparity by exploring measures that would expand mortgage policies to include alternative financing options.
Types of Halal Mortgages
Halal mortgages, rooted in Sharia principles, offer payment structures that exclude interest and provide avenues for homeownership. Three common types of halal mortgages include Ijara, Musharaka, and Murabaha.
Read More: PIA air hostess travels of Canada without a passport
Ijara operates on a rent-to-own basis, where a bank purchases the property and leases it back to the customer. Through regular payments, the customer contributes to both the property’s capital and the financial institution’s profit. Musharaka involves a partnership between the financier and the customer, allowing both parties to co-own the property until equity is gradually transferred over time. This collaborative ownership model aligns with Islamic finance principles, fostering shared responsibility. Murabaha employs a credit system, immediately transferring ownership to the customer. Profit is factored into the final offer, considering elements such as the buyer’s credit history and deposit. This approach ensures compliance with Sharia principles while facilitating homeownership for the customer.