This article was co-written and submitted by Tim Hudak , CEO of the Ontario Real Estate Association (OREA), Canada’s largest provincial real estate association and Dr Mohamad Sawwaf, CEO of Manzil Inc., Canada’s premier Islamic banking institution.
It’s no secret that Ontario is facing a housing supply and affordability crisis, pushing the dream of homeownership further out of reach for too many families. For too many of Ontario’s nearly one million Muslim residents, that dream is even further away – Canada remains the only G7 country that doesn’t have the necessary financial and regulatory frameworks to enable halal mortgages. Currently, Alberta is the only Canadian province that is actively working to address this gap and Ontario should join them.
Many Muslim Canadians face a unique challenge when looking to buy a home – Islamic belief prohibits the paying or receiving of interest (known as ‘riba’). This means Canada’s traditional interest-bearing mortgage structures are leaving thousands of Ontario residents frozen out of the housing market.
Although halal mortgages avoid ‘interest’, they are not free of charge – families would pay similar to what their neighbours do with a conventional, interest-bearing mortgage. In fact, the structure of a halal mortgage – currently only offered by some private lenders – typically closely resembles rent-to-own or shared equity agreements. There are two ways halal mortgages are currently being facilitated by private lenders. With "Murabaha", the lender buys and resells the property to the buyer at an agreed profit margin, and with "Musharaka", a partnership is formed, with the buyer eventually owning the property after purchasing shares from the financier.
Simply put, a halal mortgage is just another modern model of ownership. Once permitted, all Ontarians, regardless of faith, would have access to halal financial products through the province’s financial institutions.
As one of the most diverse provinces in Canada, financial institutions and the real estate sector must collaborate to implement modern, culturally relevant solutions to address all barriers to homeownership in Ontario. With government onside, addressing this gap in the market presents an important opportunity for the real estate and mortgage industry to innovate, evolve, and embrace the needs and values of the countless young families across our province aspiring to have a place to call a home of their own.
Ontario needs fairness in its legislation for those pursuing alternative finance models, including models structured similarly to rent-to-own agreements. When purchasing their first home, Muslims using halal mortgages can't access the same tax credits as their neighbours who are using traditional mortgages – including tax rebates on new construction and land transfer tax exemptions. They may even be "double taxed" as a result of how their mortgage is structured. Equally important, Ontario must ensure that other housing-related legislation like the Residential Tenancies Act do not unintentionally prohibit these models.
The Canadian Mortgage and Housing Corporation (CMHC) also has a role to play in facilitating financing by making halal mortgages eligible for mortgage-backed securitization.
These changes pave the way for further alternative financing options and modern ownership models.
The immediate need to enable halal mortgages in Ontario — and for the government to make these products fairer and more equitable in the tax code — is about lost opportunity. If we refuse to modernize and continue to permit only traditional mortgages and financial tools, we will leave countless Canadians out of the housing market.
The time is now for us to join our peers across G7 nations and allow financial products that are deliberately structured to both comply with Canadian law and accommodate Islamic beliefs. By joining Alberta and levelling the playing field for halal mortgages, Ontario will set a precedent for the rest of Canada, showcasing our Province’s commitment to keeping the dream of homeownership within reach for all Ontarians. Together, let's build an Ontario where every citizen can say, "Home is where the heart is," without compromising their deeply held values.
