Assalamuleyikum wr wbr, I have a question related with Zakat. I am doing a Tijarat/business of real estate which is to buy a property completely under my posession & sell it when i get the better price. First of all is this business & it's earning halal. Second, do i have to pay zakat on the entire property value that i own & it's benefit or just on the benefits that i secured out of these transaction. Some people says that i have to pay zakat on entire property value & it's benefit. Which i dont' agree becuase i see this business as no difference than investing your money in owning a property, buying machinery, paying wages etc. Third, If i buy a property & sell it without taking into possession as i recieved a better offer before taking into posession. Is this business & earning halal. I think yes becuase i read one hadidth where i think one companion purchase camel & sell it to another person as he gets the better offer before giving the full amount to original. So in this case he did the same like i mentioned for property? Please suggest on my all three query separately.

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.

We will answer your question through the following points:

1- The issue of trading in real estate (property): We have already clarified that this is permissible in Fatwa 93779.

2- Purchasing a property with the intention of selling it and getting a profit out of it: This makes it a tradable item and Zakat becomes due on its value if it fulfills the conditions of Zakat which we clarified in Fataawa 103089 and 142025.

As regards the rental property and the rental income from buildings, houses, apartments, shops and the cars intended for rent and the like, then the scholars in the past and present differed in opinion as to the method of paying Zakat on it.

Some of them are of the view that these assets should be valued as tradable items on the expiry of each (lunar) year and Zakat should be paid on it as tradable items.

Some of them are of the view that Zakat should be paid on its rental income once it is received in the same manner Zakat on money is paid without the need for the expiry of the Hawl (i.e. the cycle of full lunar year).

Some other scholars are of the view that its income should be added to the Zakatable wealth and Zakat should be paid on the total if it reaches the Nisaab (minimum amount liable for Zakat) after the expiry of the Hawl. This last opinion is the view of the majority of the scholars of the different Schools of jurisprudence. Thus, Zakat is due on the rental income if it reaches the Nisaab by itself or with other money or tradable items added to it, and this is the preponderant opinion.

3- The issue of selling a property after possessing it and before paying all its price: This is permissible as we clarified in Fatwa 122183.

As regards selling it before possessing it in a manner that is considered possession according to the customs, then there is a difference of opinion among the scholars regarding its permissibility. The preponderant opinion of the scholars is that it is not permissible to sell something before taking possession of it, whether this is a movable item or a property as the Prophet said: "Whoever bought food, he should not sell it before possessing it.” [Muslim] Ibn ‘Abbaas said: “I consider that this applies to everything else, as the Prophet prohibited selling goods where they are sold before the merchants have taken possession of it and moved it to their own property.” [Ahmad, Abu Daawood - Ibn Hibbaan and Al-Haakim classified it as Saheeh (sound)]

However, possessing a property means that the first owner gives up his ownership of it and leaves it for the buyer to dispose of it as he pleases.

Allaah Knows best.