Short Answer

If the property was primarily purchased to live in or rent out for fixed income, then no. However, if it was primarily purchased to sell it, then Zakāh is due every year on the current market value. If you purchased the land or burial plot for yourself or family to use then no Zakāh is due on it. However, if you purchased it as an investment with the intention to sell it when the value goes up then you must pay Zakāh on the current market value every year. For a property under construction: If you intend to sell the property as soon as it is ready, then yes. Zakah will be due on the current market value, since it resembles a product being manufactured to be sold soon.

Reason for Asking the Question

When purchasing real estate, it is common to have the dual intention of “using” the property as well as “investing” in it, hoping for capital gain and eventual resale. The first intention exempts it from Zakah. The second intention requires Zakah. The questioner wants to know which category their purchase falls into.

Zakah is not due on personal items but is due on merchandise for sale. The questioner wants to know which category purchased land would fall under.

Since the property is not ready to be sold yet, the questioner wants to know if this counts as a sellable item or is exempted from Zakah.

Advice

You might have a dual intention to both rent it out and then sell it once the value has increased. It is difficult to give a clear answer in this scenario whether Zakah is due or not. One possible question to ask yourself is: if you could not collect any rent at all would you still have bought this property? Let’s assume you intended to rent out the property for ten years hoping for a 6% annual return and a 3% annual value increase. If you would have purchased the property without factoring in the 6% annual rental income then it means you primarily purchased it for capital gain, and must pay Zakah yearly. If you would not have, and invested your money elsewhere hoping for a higher return, then your primary intention was not for capital gain so you do not pay Zakah. Nonetheless, this is one of the most difficult questions to have a clear answer about, and the default position of scholars in the past is that real estate for personal use is exempted from Zakah.

Version 0.5 | [Shaykh] Mustafa Umar | 5-21-2020