Religious ruling regarding constructing a house using Zakat funds

ACJU/FTW/2020/02-386
2019.02.24 (1441.06.29)

Answer: All praise is due to Almighty Allah. May peace and blessings be upon His final Messenger, Muhammad (peace and blessings of Allah be upon him), and upon his family and companions.

Zakat is one of the five fundamental pillars of Islam. It is an act of worship whereby a specified proportion of certain types of wealth belonging to those who are liable to pay Zakat is given to those who are eligible to receive it.

Zakat is due on gold, silver, cash, trade goods, sheep, cattle, camels, storable food grains, grapes, and dates.

The majority of Islamic scholars are of the view that, when giving Zakat, the Zakat should be paid from the very type of property on which Zakat is due.

However, in the case of Zakat on trade goods, Zakat must be paid in currency based on the value of the goods. Instead, other items cannot be given as Zakat. This is also the view of the majority of Islamic scholars.

This is clarified by the following statement:

Umar (may Allah be pleased with him) said to Hammas: “Assess the value of your trade goods and pay the Zakat due on them in their value, using the currency in which you conduct your trade.”

However, according to the scholars of Hanafi madhhab, Zakat may be paid either in the same type of property on which Zakat is due, or, alternatively, by paying its equivalent value in monetary terms.

Accordingly, based on the view of the majority of Islamic scholars that Zakat on trade goods must be paid in monetary form, it is not permissible to construct houses with Zakat funds and provide them to those who are eligible to receive Zakat.

If it is intended to construct houses using Zakat funds, the following methods may be adopted:

First: Constructing houses at the request of those who are eligible to receive Zakat after giving them their due Zakat.

Under this method, houses may be constructed for eligible Zakat recipients after their due Zakat has been given to them. If they themselves request the Zakat-distributing organization to construct a house for them using the Zakat they have received, the organization may undertake the construction of houses on their behalf.

The Zakat recipient must be given complete freedom to use the Zakat according to their own discretion. It should also be noted that if Zakat is given on the condition that it must be used specifically for constructing a house, the Zakat will not be valid.

When houses are constructed under this method, the ownership of the houses must be transferred to the respective Zakat recipients without delay. The title deeds should be issued in their names immediately, rather than being transferred at a later stage.

Second: Obtaining loans from wealthy individuals to meet needs that benefit Muslims, such as constructing houses, and using those funds to fulfil such needs.

In other words, funds may be borrowed from financially capable individuals to meet the needs of others. If the person who has taken the loan is unable to repay the debt, scholars have stated that the debt may be repaid from the Zakat funds allocated to the category of debtors (al-Ghārimūn), one of the eight categories of people eligible to receive Zakat.

Based on this view, an organization undertaking to construct houses may appoint certain individuals who are eligible to receive Zakat. These individuals may obtain loans from wealthy individuals to cover the expenses required for constructing the houses.

Once the houses have been completed, they may be donated to those in need. The Zakat allocated to the category of debtors (al-Ghārimūn) may then be used to repay the loans taken for the construction of the houses.

Here is a more formal version, suitable for inclusion in an official Fatwa:

Under this method, upon completion of the houses, it is not necessary to immediately transfer the title deeds to the beneficiaries.

The transfer of ownership may instead be deferred for a specified period. During this interim period, the beneficiaries may be granted permission merely to occupy and make use of the houses. If, thereafter, the organization is satisfied with their conduct and considers it appropriate to do so, the title deeds may subsequently be transferred and duly registered in their names as a donation.

And Allah, the Almighty, knows best.

Ash-Shaikh M.L.M. Ilyas
Secretary – Fatwa Committee
All Ceylon Jamiyyathul Ulama

Ash-Shaikh I.L.M. Hashim Soori
Supervisor – Fatwa Division
All Ceylon Jamiyyathul Ulama

Ash-Shaikh M.M.A. Mubarak (Qafoory)
General Secretary
All Ceylon Jamiyyathul Ulama

Mufti M.I.M. Rizwe
President
All Ceylon Jamiyyathul Ulama