Question # 373: I am currently paying zakat on my annual saving. However, I exclude my rental properties from my annual saving. Rental income become part of my saving and I pay zakat on it. My son is studying in a different city. In Sha Allah I am buying an apartment in that city where my son is studying. My son will live in that apartment for next three years. I will rent out the apartment after three years. In short, the purpose of buying this apartment as a long-term investment and to generate rental income which will help me when I will retire. I will not sell this property. However, my son will use it for three years and I will not have any rental income from it. Do I need to pay zakat on this property?
bismi-llahi r-raḥmani r-raḥīm,
Assalamu ‘laikum warahmatullahi wabarakatuh,
All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).
Dear questioner,
First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.
Shorter Answer: Since your apartment is meant for long-term investment and will not be leased for at least next three years, you do need to pay any zakah on either the value of the apartment or its rental (which does not exist as of now). Once you lease it out on rent, the rental money will be zakatable as long as it has reached the minimum legal amount (nisaab) and a full Islamic lunar year has passed (whether on its own or when added to any other wealth you possess). Since you mentioned the words ‘annual savings’, we recommend you to refer to Question # 205: Calculation of yearly Zakat on increased amount as well.
Long Answer: Dr. Monzer Kahf says “Home in areas different of the area where a person actually lives is not zakatable if it is still home, when you go there you live it and if your spouse, children, etc., go there they stay in it. That is your home, even if your parents and other relatives live in it. It is not zakatable. This is more clear if you don’t take rent, and especially with parents because you are required to provide for them. But if it remains home even with some relatives who live in it while you are away and probably with you when you go there, it is still not zakatable because it is still home…, if it is turned into investment property and used for its rent, the views on real estates investment apply…” (Fatawa on Zakah)
In one of his fatwa, Dr. Salah Al-Sawy, the Secretary General for the Assembly of Muslim Jurists in America wrote: “You do not have to pay zakah on the apartment you bought to live in. The other apartment is property subject to zakah. The amount of zakah that must be paid on it should be calculated according to the manner in which you invest this property. If you have prepared it for rental, you must pay zakah on the amount of rent money, as long as it has reached the minimum legal amount (nisaab) and a full Islamic lunar year has passed since it has been in your possession, whether it reaches a nisaab in itself or when added to any other wealth you possess. If you wanted to make a turnover on the apartment itself by buying and selling, with the intent to make a profit, you must pay zakah on the value of the apartment itself—it would then have the same status as any merchandise prepared for trade, whenever a year has passed from the date you initially designated it for investment…”
“When a person buys land [/property], one of three scenarios must apply:
- That which is intended for living on. This is not subject to zakah, because it is not for trade or business.
- He buys the land [/property] with the aim of selling it and seeking to make a profit from it. This comes under the heading of trade goods if one full (hijri) year passes. Then he should see how much it is worth when the year has passed and pay one quarter of one tenth of its value at the time when the year has passed.
- When he wants the land [/property] that he buys as an investment, so that he can develop it by building shops or apartment buildings to rent them out. No zakah is due on the land [/property] itself, rather zakah is due on its revenue. If he receives in rent money that passes the nisaab (minimum threshold), and one year has passed since the rental contract was drawn up, then he must pay zakah on it.” (Al-Muntaqa min Fataawa al-Fawzaan)
Therefore, since your apartment is meant for long-term investment and will not be leased for at least next three years, you do need to pay any zakah on either the value of the apartment or its rental (which does not exist as of now). Once you lease it out on rent, the rental money will be zakatable as long as it has reached the minimum legal amount (nisaab) and a full Islamic lunar year has passed (whether on its own or when added to any other wealth you possess). Since you mentioned the words ‘annual savings’, we recommend you to refer to Question # 205: Calculation of yearly Zakat on increased amount as well.
Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.
Wassalaam
