Is zakah necessary for real estate? How is zakah given for houses, flats, plots of land, factories, motor vehicles and real estate that are hired out?

The Answer

Dear Brother / Sister,

The main feature of the goods subject to zakah is "having the property of increasing and yielding income". Goods known by the world such as factories, motor vehicles, and real estate that yield great income emerged after the industrial revolution and social and technical developments. The characteristic of these goods is that they yield great income by being hired out or used in production, without changing ownership.

It is not regarded appropriate to apply the principle of exempting the house, shop, tools and objects obtained by individuals for their personal and professional needs from zakah because some of these goods like buses, planes, ships, rented houses, wedding halls, factories and shops are among common and important sources of income today, unlike the past. Machines and factories used in production - unlike the simple tools of the past - are sources of income that produce things through workers without the need for the manual labor of the owner.

Fiqh scholars like Ibn Aqil of Hanbali and Ibn Arabi of Maliki argued that both the goods themselves like jewelry that are rented, not sold, and their income were subject to zakah at the rate of 2.5%. (Ibn Arabi, Sharhut-Tirmidhi, III/104; Ibn Qayyim, Badai'ul-Fawaid, al-Muniriyya imp., III/143)

The fact that these goods do not yield income by changing hands through buying and selling but by leasing or running prevents them from being regarded as commercial goods. Their revenues cannot be compared to securities income. For this reason, it is more correct to evaluate them like land as contemporary Islamic scholars M. Abu Zahra, Khallaf, Abdurrahman Hasan and Qardawi do. Accordingly, the rental income and production income of such goods, not the value of the goods themselves, will be subject to zakah at the rate of 1/10 from the net income or 1/20 from the gross income just like agricultural goods. Annual depreciation value for goods subject to wear and tear, like transportation vehicles, machinery and factories, will be deducted from the basis of assessment, and if the amount of rental income and production reaches the amount of nisab, zakah will be given at the rate of 1/10 if the net income is certain or 1/20 if it is not certain. (Halqatud-Dirasat al-Ijtimaiyya, ad-Dawrath-Thalitha, Damascus 1952, p. 241-242; Qardawi, Fiqhuz-Zakah, p. 479-486)

Accordingly, if the net annual income of the rented place, machine, house, factory, etc. reaches the amount of nisab, one tenth of it (or one-twentieth of it out of gross income) is given as zakah.

The zakah of the goods that are subject to zakah at the rate of 1/40 and zakah of the goods like a house, bus, machine and hotel that are subject to zakah at the rate of 1/10 (or 1/20 out of gross income) are calculated separately.

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