Question: What are the situations in which zakah is due on real estate and land? Answer: بسم اللہ والصلاۃ والسلام علی رسول اللہ To discuss the matter of zakah on real estate, we may note the following: * Is real estate wealth? The general principle concerning this matter is that real estate is not wealth that is subject to zakah; therefore the basic guideline is that zakah is not due on it unless it is for trade. * When is zakah on real estate due? With regard to real estate that a person acquires for his accommodation or for any personal use, such as storage and the like, no zakah is due on it, according to scholarly consensus. Even if it is kept for many years, so long as the owner’s intention does not change. * Is agricultural land subject to zakah? Agricultural land is not subject to zakah; rather zakah is to be paid on the crops and fruits only. But if a person buys land in order to trade it, and he cultivates it until he sells it, so the trees bear fruit and crops grow and ripen, then he must pay zakah on the fruit and grains, at a rate of one tenth, and he must pay zakah on the value of the land, because they are two different types of dues, which differ in the reasons why they are obligatory; one of them does not cause the other to be waived. * Is there zakah on real estate acquired for renting? There is no zakah on apartments, houses, storage places, furnished apartments, hotels and high-rise buildings, if they are prepared to be rented out, according to the majority of scholars ; rather zakah is due on the rent that is collected from it, when one full year has passed. * Zakah on real estate acquired for trading With regard to real estate that a person acquires with the intention of trading or selling it, (to make money thereby and make a profit on it.) zakah is due on it according to the majority of scholars. However simply wanting to sell does not necessarily make it trade goods, As for trading, this refers to selling with the aim of making money and making a profit from it. * Is there zakah on real estate that is not for trade? If he buys real estate but does not have any firm intention of wanting it for trade, or he has no specific intention, then it is not subject to zakah. (Majmu‘ Fatawa al-‘Uthaymin, 18/232) If he takes possession of the real estate for his personal use and to live there, then he decides to trade it after that, then there is a difference of scholarly opinion as to whether zakah is due in this case. View that zakah is due on it is more likely to be correct. If he acquires the real estate with the intention of trading, then he decides to keep for personal use that become personal property (and therefore not subject to zakah ), according to scholarly consensus.” (Al-Majmu‘, 6/49) * Is there zakah on real estate for personal trade and trading? If he acquires the real estate for personal use plus trading, or for trading plus personal use, then what matters is what his intention was when he bought that property. Whoever buys any item with the intention of using it himself, and also intends that if he could make a profit on it he will sell it, then no zakah is due on it. But whoever buys an item with the intention of trading it, and uses it for personal benefit whilst he is waiting until he can sell it, then zakah is due on it every year, until it is sold. Similarly, if he decides to use it and benefit from it for a certain length of time before selling it, then it is subject to the zakah on trade goods, because his initial intention to make use of it is not contrary to its being prepared for trade. * Ruling on zakah on real estate still at the construction stage If the real estate is still at the construction stage – and it is for trade – then zakah is due on it every year, whether it is offered for sale or will not be sold until after construction is complete. Zakah must be paid on it according to its value in the current situation at the time when zakah becomes due. * Ruling on real estate bought for protecting one’s wealth In the case of real estate that is bought with the intention of protecting one’s wealth, no zakah is due on it, unless the owner is trying to evade zakah. * Ruling on real estate not taken possession of If a person buys real estate for the purpose of trade, but he does not take possession of it until one year has passed since his acquisition of the wealth with which he bought it, then zakah is due on it, because ownership of real estate passes to the purchaser once the contract is done and he is able to take possession of it. (Majmu‘ Fatawa wa Rasail al-‘Uthaymin, 18/234) * Is there zakah on mortgage property? Zakah must be paid on it if it is prepared for trade and not personal use. (Fatawa Nur ‘ala ad-Darb, 15/43) * Zakah on real estate owned by multiple partners “In order for zakah to be obligatory upon each partner in ownership of real estate, the value of his share of the property must reach the minimum threshold by itself or when added to other wealth of his that is subject to zakah, such as cash or trade goods.” (Fatwa Jami‘ah fi Zakat al-‘Iqar, p. 12) The view of the Shafi‘is is that what matters is the total value of the property, not the minimum threshold of each individual. So if the value of the real estate reaches the minimum threshold, each of them must give zakah, even if his own share does not reach that threshold. This was the view adopted by the Islamic Fiqh Council. * Is there zakah on real estate endowed for charitable causes? With regard to real estate that is endowed for charitable causes (i.e., a waqf), such as to benefit the poor, there is no zakah on it, because it is no longer the property of any individual. * Is there zakah on real estate that is not selling? With regard to zakah being obligatory, there is no differentiation between real estate that sells easily and that for which a buyer cannot be found, so long as it still has value for which it may be sold. But if the real estate is not selling, to the extent that the owner is offering it for sale but cannot find anyone to buy it from him, then some of the scholars said that he should pay zakah on it for one year when he does sell it. * Ruling on shares in real estate With regard to shares in real estate , zakah should be paid on them at the same rate as zakah on trade goods, because these real-estate companies buy land for the purpose of trading in it. * Ruling on property on which there is a lien With regard to property on which there is a lien, or real-estate companies that are in turmoil, in which one has shares, no zakah is due on them; they come under the ruling on wealth that is beyond one’s control. “With regard to land that is designated for public facilities, schools and so on, where the owner is prevented from disposing of it unless the authorities decide that they no longer need it, no zakah is due on it until after the owner becomes able to dispose of it, in which case he should wait to pay zakah on it until one year has passed since he became able to dispose of it.” (al-Masail al-Mustajiddah fi’z-Zakah, p. 87) The same applies to shares in real-estate companies that are in turmoil, where the reason for turmoil may be because of corruption and cheating on the part of the management of the company, or the reason may be impediments in the rules and regulations laid down by the state, or disputes or liens against that property. Whatever the case, if there are shares in real estate that the owner cannot dispose of, no zakah is due on them. * When should the value of the real estate be worked out? The value of the real estate should be worked out at the end of the year, based on the market value at year’s end, which may be lower or higher than the original purchase price. The working out of the year does not begin from the time of purchasing the real estate; rather the year in question is one year from acquisition of the wealth with which the real estate is purchased. And Allah knows best.