The Ruling on the Zakah of Land Held for Sale

Question:
A man says: I bought a piece of land for one million riyals on an installment plan, paying five thousand riyals per month, with the intention of trading in it. The question is: how do I pay the zakah? I ask for clarification on this.

Answer:
If he is holding it for sale—if this land he bought was intended for sale and put up for sale—then it is commercial, a commodity among commodities. If he is able to complete the sale while it is still on the market, he appraises it at its current value and pays zakah on that assessed value, not on the price he bought it for, but on the value it has when the lunar year is completed. He pays one-quarter of one-tenth. And so it goes every year that passes while he is offering it for sale and waiting to sell it: he appraises it each year at its value and pays zakah on it for every year that passes, whether its value has increased, decreased, or remained the same as the price he bought it for. This is the correct way to pay the zakah. It makes no difference whether he bought it for a cash price and paid it, or for a deferred price and has not yet paid it. The whole matter is that this is commercial, a commodity. This commodity, yes. May Allah reward you. In the hadith, it is stated that you pay zakah on what you hold for sale. Yes.