Canada plans halal mortgage for Muslims, faces questions
The Canadian government is exploring halal mortgages to help Canadian Muslims buy houses as part of Prime Minister Justin Trudeau's push for homeownership. The plan has been questioned and criticised by people. Canada, meanwhile, has extended the ban on foreigners buying houses.
In Short
- Trudeau aims to boost homeownership with halal mortgages
- The government seeks to safeguard homes for Canadians
- The housing sector has faced shortages with a sharp rise in immigrants
The Canadian government is exploring ways to make homeownership more accessible, including introducing Sharia-compliant financing activities referred to as 'Halal mortgages'. This initiative is part of Prime Minister Justin Trudeau's plan to support homeownership aspirations, particularly among Muslim Canadians. This comes even as the Trudeau government extended the ban on foreigners buying houses.
The plan to introduce Halal mortgages by banks faced questions and criticism from people.
Justin Trudeau and Finance Minister Chrystia Freeland released the 2024-25 budget on April 16.
The Liberal government announced in the federal budget 2024 that it has begun consultations with financial institutions and various communities. Their goal is to understand how federal policies can better cater to the diverse needs of Canadians seeking to buy a house.
"This could include changes in the tax treatment of these products or a new regulatory sandbox for financial service providers, while ensuring adequate consumer protections are in place," the Canada Budget 2024 document specifies.
WHAT ARE HALAL MORTGAGES?
Halal mortgages adhere to Islamic law, which prohibits charging interest, considering it usury (lending money at high rates of interest).
Islamic financial institutions offer unique mortgage products that avoid conventional interest payments.
Some Canadian financial institutions already provide Islamic law-compliant mortgages, but none of the country's five major banks currently do.
Experts suggest these alternative mortgages might not be entirely interest-free but could involve regular fees instead.
The proposal sparked debate on social media, with some calling it an attempt to benefit a specific group.
"Yup. Halal mortgages have been a thing in Canada for years already. We are paying interest. They are not paying interest. Why?" asked a Canadian on X.
Others questioned the different tax treatment based on religious lines.
"Trudeau Liberals to introduce 'Halal mortgages' for Muslims. This could include changes in the tax treatment of these products. Religious financial products with different tax treatment? What?," wrote a user on X.
"What's this "Halal mortgages". Don't we all live under the same laws, Canadian laws, in Canada?" asked another person.
Unlike what people believe, alternative mortgages might not be interest-free but involve regular fees as substitutes for interest charges, say experts.
EXTENSION OF FOREIGN BUYER BAN
In its budget document, the Canadian government introduced a two-year extension of the ban on foreign investors purchasing residential property, which came into effect on January 1, 2023.
The government's stated aim is to ensure homes are available for Canadians to live in and not become speculative investments for foreign buyers.
To help ensure that homes are used for Canadians to live in, not as a speculative asset class for foreign investors, on February 4, 2024, the government announced it intends to extend the ban on foreign buying of Canadian homes by an additional two years, to January 1, 2027.
"Foreign commercial enterprises and people who are not Canadian citizens or permanent residents will continue to be prohibited from purchasing residential property in Canada," the budget document said.
CANADA HOUSING SHORTAGE
Canadian Prime Minister Justin Trudeau acknowledged the challenges posed by the increase in temporary immigrants entering the North American country, and stated that it had surpassed Canada's capacity to absorb them and the situation needed to be brought "under control". Indians form a major chunk of foreign workers and international students in Canada.
Trudeau mentioned that back in 2017, only 2% of the population consisted of temporary immigrants, but now it's grown to 7.5%.
In 2022, Canada welcomed 5.5 lakh international students. 40% of the total, at 2.26 lakh, were from India. And there were 3.2 lakh Indians staying in Canada on student visas.
But the pace of immigration has outpaced the construction of houses in Canada. So much so that Canada will be short by 35 lakh residential units by 2030.