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Feds eyeing ‘alternative financing products,’ but critics charge measure is a ‘desperate ploy’ for votes
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As the federal government unveiled its latest budget, Justin Trudeau’s Liberals revealed its plans to explore new ways to expand home ownership, including the adoption of “halal mortgages.”
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According to this week’s federal budget, the Liberal government revealed it “is exploring new measures to expand access to alternative financing products, like halal mortgages.”
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The charging of interest goes against the Islamic faith and financial gains made through interest are viewed as unjust in the eyes of Sharia law. A “halal mortgage” still lets lenders earn a profit with a different set of terms that can include charging a higher overall price for a person’s home (essentially including future growth gains in the selling price), engaging in a rent-to-own model or establishing a partnership between a lender and home owner that slowly reverts to the latter over time as payments are made.
Mohamad Sawwaf, the co-founder and CEO of Manzil, an Islamic financial institution based in Toronto, says that “halal mortgages” are the same as traditional ones.
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“The process and documentation is what makes the transaction halal,” he told CTV News in 2022.
“People that get Islamic mortgages still pay a comparable amount that you would pay if you got a conventional mortgage. It’s just that the structure of these mortgages are different,” Walid Hejazi, an associate professor of economic analysis and policy at the University of Toronto’s Rotman School of Management, tells CBC.
The Liberals said that changes could see adjustments “in the tax treatment of these products or a new regulatory sandbox for financial service providers.”
Muslims represent almost 5% of the Canadian population, more than doubling in size since 2001. In 2022, a group urging Canadian-Muslims to vote in the Ontario election predicted they would affect the outcome in almost 50 provincial ridings.
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The feds began consulting with financial service providers last month “to understand how policies can better support the needs of all Canadians seeking to become homeowners.”
An update on the scheme is expected later this year in the 2024 fall economic statement.
As the news made headlines in recent days, Canadians reacted to the plan with a mixture of confusion and anger on social media.
Many referred to the proposition as a “desperate ploy” by the Liberals to secure more votes and calls for religion to be kept out of politics.
“Bigotry aside, these are just fixed rate mortgages with mental gymnastics to fool God,” one person wrote on Reddit.
“I’m a Muslim myself but I don’t understand why Canadians are entertaining this aspect of Sharia law. The Muslims who immigrated here did so with full knowledge of how the western finance work,” another added. “Nothing more than pandering by the Liberal government.”
“If someone wants to move to Canada, they can adjust to the way we operate in our country, not the other way,” a third wrote.
The measure also drew criticism in the House of Commons on Friday after Liberal MP Iqra Khalid insisted the feds are looking “to understand how federal policies can protect Canadians from abuses.”
Bloc Quebecois MP Marilene Gill questioned why “halal mortgages” are “included in the budget” and accused the Liberals of coming up with a “tailored solution” after a Muslim group threatened to cut off a $680,000 donation to the party.
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“Why do they want to introduce elements of sharia law into the mortgage rules of this so-called secular country?” Gill’s fellow Bloc MP Martin Champoux asked.
But advocates say that intervention is needed because Muslims partaking in “halal mortgages” can be forced to pay higher rates than conventional mortgages. Wider access and more competition could see those rates drop.
“Canada is about 20 years behind on Islamic finance compared to other developed countries like the U.S. and U.K.,” says Zuhair Naqvi, who founded Oakville, Ont.-based Eqraz.
Battered in the polls and facing a home ownership crunch, Trudeau has pledged to build nearly four million homes by 2031.
“It’s a plan to build housing, including for renters, on a scale not seen in generations. We’re talking about almost 3.9 million homes by 2031,” the prime minster said earlier this month.
Finance Minister Chrystia Freeland also announced the feds will allow 30-year amortization periods on insured mortgages for first-time homebuyers purchasing newly built homes.
mdaniell@postmedia.com
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