How is zakah for a house, plot of land and construction calculated? I am a builder. How should I calculate my earnings and give zakah? I construct apartment buildings and sell flats.

The Answer

Dear Brother / Sister,

The cost of the flat and the profit obtained by selling the flat should be added; if there are any debts, they should be subtracted. Zakah should be paid from the remaining amount. 

Explanations related to different states of the issue are as follows:

1. I am a tenant. I have two houses. I receive rents from my two houses. I add some money to that rental income and pay for my installment of another flat that is being built by a housing cooperative. How should I give zakah for my rental income and my share of the flat that is being built?

Answer: You have two houses but you preferred to be a tenant. If the rental income of the houses you own is more than nisab amount, you have to give one-twentieth of your gross income as zakah every month. 

If you intend to live in the flat that is being built, you do not have to pay zakah for it when it is still being built. If you intend to sell it, you have to pay one-fortieth of the current value of the flat as zakah.  

2. I bought a plot of land with the intention of commercial investment; I made a deal with a construction firm based on flat for land method. I will receive my flats three years later from the builder. My intention is commercial for the flats I expect to receive in three years. I will sell them after receiving them and use the money from the sale as a commercial capital. What is the decree on it related to zakah?

Answer: Those flats are commercial goods. Those commercial goods have a certain market price; you can sell them even before the construction is completed. It is necessary for you to pay one-fortieth of zakah for the market (current) value of the flats.

3. I have shares of flats of various housing cooperatives with the intention of commercial investment. My shares of the flats will be delivered to me in three years. I pay certain installments for those flats.  What is the decree on them related to zakah?

Answer: Your immovable shares in the housing cooperatives are commercial assets; zakah is necessary for them as it is stated in the previous answer. The monthly installments you pay to the cooperative and other expenses need to be included in the calculation of zakah when your beginning of zakah year comes; that is, when you determine your zakah assets, you will subtract your expenses and debts.

4. I built an apartment building as a commercial investment. It cost me 100.000 EURO. I could not sell it for 150.000 EURO, which is its market value, for a long time. I still have it. What is the decree on it related to zakah?

Answer: The difference between this building and the share of a cooperative is that its cost is certain since you yourself built it. You have to pay one-fortieth of its cost as zakah every year. If you sell it, the money you will get (cost and profit) for it will be included in the zakah of the following year and the zakah of that income will be paid then.   

5. I have a shop. I could not sell it; therefore, I rented it out. I intend to sell it if I am offered a reasonable price and to use that money in trade. What is the decree on it related to zakah?

Answer: Since you regard the shop as a commercial asset and want to sell it, you need to pay one-fortieth of its cost (if you have built it yourself, its cost; if you have bought it or obtained it based on flat for land method, its market value) as zakah. If the rental income on its own or with the addition of other rental incomes is more than nisab amount, it is necessary to pay one-twentieth of the gross income as zakah.

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