Question. Do I have to pay zakah on real estate land?
Bismillah wal-Hamdulillah was-Salatu was-Salam ‘Ala Rasulillah
The property you own can fell into one of two categories:
- No zakah is due on property unless its prepared for sale.
There is no zakah on property for personal or business use that is not meant for trading.
For clarification, if you rent a property, the profit you earn from it is subject to zakah, not the value of the property itself.
- Land bought for the purpose of selling comes under the heading of trading goods (‘urudh al-tijarah). Therefore, zakah is to be paid when property is a tool of investment.
The general principle in Islamic Law is that trade goods are to be calculated on the completion of one year at market value, regardless of the price for which they were bought, whether that was more or less than the market price at the time when zakah becomes due. The zakah should be paid from their value.
The evidence is the well-known hadith narrated from Samurah ibn Jundub who said: “The Messenger of Allah ﷺ commanded us to pay zakah on everything that was prepared for sale.” (Abu Dawud)
The rate of zakah is 2.5%. So for land worth $1000, for example, the zakah is $25, and so on.
And Allah knows best.
Zakah on Real Estate Feature Image Credit: David Grimes