Zakat on Real Estate
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Question: We bought three plots of land. One was intended for immediate construction, while the other two were intended for future benefit, either by selling them or developing them. Six years have passed, and we have not paid the zakah on any of them. Is there anything we owe in this regard? And how much must we pay?
Answer: The lands that a person buys do not fall outside of one of three categories:
The first type: That his intention is to use them for residence, to develop and live in them, or for agriculture, by planting crops or trees. In this case, there is no zakah on them, because they have become part of his necessities that he needs. However, if he utilizes them for agriculture or planting palm trees, he must pay zakah on their produce, such as grains and fruits, in the prescribed manner.
And the second type: That he buys the lands with the intention of trading and seeking profit from their price. These are trade goods, like other commodities. If a lunar year passes while they are held for trade and he is waiting for a profit, he must appraise them at the end of the year by determining their value at that time, and pay one-fifth of one-tenth (2.5%) of their current value. Alternatively, he may combine them with his other assets and pay the zakah on the total.
And the third type: That he intends to use the land he bought for investment by developing it into shops or residential buildings for rental. In this case, there is no zakah on the land itself, but rather on its income. If he receives rental income that reaches the nisab (minimum threshold) and a lunar year passes over it, he must pay zakah on it. If it is less than the nisab, he must combine it with his other money and pay zakah on the total.
These are the types of land in a person's possession. Regarding what you mentioned about buying two plots of land, one for residence, we know that there is no zakah on that one. As for the second plot, where you are undecided whether to use it for residence or sell it, as long as you are undecided and have not resolved to make it a trade commodity, there is no zakah on it, because zakah is not obligatory on it unless you resolve to make it for trade.
Answer: The lands that a person buys do not fall outside of one of three categories:
The first type: That his intention is to use them for residence, to develop and live in them, or for agriculture, by planting crops or trees. In this case, there is no zakah on them, because they have become part of his necessities that he needs. However, if he utilizes them for agriculture or planting palm trees, he must pay zakah on their produce, such as grains and fruits, in the prescribed manner.
And the second type: That he buys the lands with the intention of trading and seeking profit from their price. These are trade goods, like other commodities. If a lunar year passes while they are held for trade and he is waiting for a profit, he must appraise them at the end of the year by determining their value at that time, and pay one-fifth of one-tenth (2.5%) of their current value. Alternatively, he may combine them with his other assets and pay the zakah on the total.
And the third type: That he intends to use the land he bought for investment by developing it into shops or residential buildings for rental. In this case, there is no zakah on the land itself, but rather on its income. If he receives rental income that reaches the nisab (minimum threshold) and a lunar year passes over it, he must pay zakah on it. If it is less than the nisab, he must combine it with his other money and pay zakah on the total.
These are the types of land in a person's possession. Regarding what you mentioned about buying two plots of land, one for residence, we know that there is no zakah on that one. As for the second plot, where you are undecided whether to use it for residence or sell it, as long as you are undecided and have not resolved to make it a trade commodity, there is no zakah on it, because zakah is not obligatory on it unless you resolve to make it for trade.