Canadian Prime Minister Justin Trudeau announced this week that he plans to introduce “halal mortgages” in an effort to help Muslims living in the country onto the property market.
According to Canada’s 2024 budget, the plan will create “alternative financing products, including halal mortgages” as a way to “enable Muslim Canadians, and other diverse communities, to further participate in the housing market.”
The liberal government said that it was “exploring” several different measures that would change “the tax treatment of these products.” Trudeau explained that Muslims are banned from charging or receiving interest due to it being viewed as exploitative and immoral. So, therefore, instead of providing loans, Islamic banks use alternative payment structures to facilitate home ownership.
Halal mortgages' do not necessarily work out any cheaper for the buyer, as the interest that would have been paid is usually structured differently. Broadly speaking, the mortgage operates on a 'rent-to-own' model, in which the financier purchases the property and then sells it back to the homeowner at a higher price, although there are variations.
Some Sharia loans can in fact have significant drawbacks in that they either effectively render the buyer a tenant for the duration of the contract or saddles them with debt. The payments are also often more expensive as they are considered more risky. Via the Daily Mail.
The prime minister stressed the importance of diversifying Canadian communities.
“Canada is a country that celebrates diversity and inclusion. This new 'Halal Mortgage' program is a testament to our commitment to fostering an inclusive society where everyone has equal access to opportunities, including in the housing market,” Trudeau said in a statement.
Canadian banks currently don’t provide halal mortgages. However, Trudeau is confident that will change.