The Canadian government is exploring ways to make home ownership easier, including introducing Sharia-compliant financing called “halal mortgages.” The move is part of Prime Minister Justin Trudeau’s plan to support home-buying aspirations, particularly among Muslim Canadians. This is happening despite the Trudeau government extending a ban on foreign home purchases.
Banks’ plans to introduce halal mortgages have been met with skepticism and criticism.
Justin Trudeau and Finance Minister Chrystia Freeland released the 2024-25 budget on April 16.
The Liberal government announced in the 2024 federal budget that it has begun consultations with financial institutions and various communities. Their goal is to understand how federal policy can better meet the diverse needs of Canadians purchasing homes.
Canada’s 2024 budget documents state: “This may include changes to the tax treatment of these products or the establishment of a new regulatory sandbox for financial services providers, while ensuring that adequate consumer protections are in place.”
What is a halal mortgage?
Halal mortgages adhere to Islamic law, which prohibits charging interest and considers this to be usury (lending money at high interest rates).
Islamic financial institutions offer unique mortgage products that avoid traditional interest payments.
Some Canadian financial institutions already offer Sharia-compliant mortgages, but none of the country’s five major banks currently do so.
Experts say these alternative mortgages may not be completely interest-free, but may come with regular fees.
The proposal sparked debate on social media, with some saying it was intended to benefit specific groups.
“Yes. Halal mortgages have been popular in Canada for years. We pay interest. They don’t. Why?” asked a Canadian on X.
Others question differential tax treatment based on religious beliefs.
“The Trudeau Liberals will introduce ‘halal mortgages’ for Muslims. This may include changing the tax treatment of these products. Religious financial products with different tax treatment? What?” one user wrote on X.
“What is this ‘halal mortgage’? In Canada, don’t we all live under the same laws, Canadian laws?” asked another.
Experts say alternative mortgages may not be interest-free, contrary to what is believed, but instead come with regular charges in lieu of interest charges.
Extend ban on foreign buyers
In budget documents, the Canadian government extended the ban on foreign investors purchasing residential properties for two years, which will take effect on January 1, 2023.
The government’s stated goal is to ensure that homes are habitable for Canadians and not become speculative investments for foreign buyers.
To help ensure that homes are intended for Canadians to live in and not as a speculative asset class for foreign investors, on February 4, 2024, the government announced its intention to extend the ban on foreign purchases of Canadian homes for an additional two years, to January 1, 2027 day.
“Foreign business enterprises and individuals who are not Canadian citizens or permanent residents will continue to be prohibited from purchasing residential property in Canada,” the budget document states.
Canada housing shortage
canadian prime minister justin Trudeau acknowledges challenges posed by increased temporary immigration into the North American country, saying it has exceeded Canada’s ability to absorb and needs to get the situation “under control.” Indians are the main group of foreign workers and international students in Canada.
Trudeau mentioned that in 2017, only 2% of the population were temporary immigrants, but now this proportion has increased to 7.5%.
Canada welcomes 550,000 international students in 2022. Of these, 40% (226,000) are from India. There are 320,000 Indians staying in Canada on student visas.
But the rate of immigration has outpaced the pace of Canadian home construction. By 2030, Canada will be short of 3.5 million residential units.
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