For Abdullah Mohiuddin, getting into the housing market involves more than just locating the right home for the right price.
Like many other Muslims, Mohiuddin’s religious beliefs include restrictions on paying and receiving interest. Given that a typical Canadian mortgage includes interest charges, this has added an additional challenge to his quest to stop renting and move into a house he owns.
“Even if the interest is very low, even if the interest rate is like 0.1 per cent, if it’s more than zero per cent, then we cannot deal with conventional banks,” said Mohiuddin.
While he has been searching for months, new options have begun to emerge in the Canadian mortgage market that could suit Mohiuddin’s needs.
Abdullah Mohiuddin can’t buy a house in Edmonton until he can locate a religiously appropriate mortgage. (Peter Evans/CBC)
Several companies in various Canadian provinces are slowly beginning to offer Islamic, or “halal” mortgages. Halal is an Arabic term that translates to “permitted” or “allowed” in English. These mortgages are deliberately structured to adhere to both Canadian law and the belief systems of many Muslims.
No interest, but you still pay
Financial products that avoid “riba,” or interest, are not free of charge just because they are free of finance charges.
Muslims looking for a halal mortgage are still going to be paying carrying costs to a financial institution for a loan to purchase their home.
“When people in Canada, in the United States heard that Islamic finance forbids interest, we in the West automatically assumed that money was for free,” explained Walid Hejazi, associate professor of economic analysis and policy at the University of Toronto’s Rotman School of Management.
That is not the case, says Hejazi, whose research has focused on Islamic finance products.
“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,” he said.
Walid Hejazi is an expert in Islamic finance at the University of Toronto, and points out that interest-free mortgages are not free of charges. (Chris Mulligan/CBC)
According to halal mortgage providers, structural differences can include the source of the loaned money, as well as legal differences. Some mortgages more closely resemble a “rent-to-own” system, where the mortgage provider is also an owner of the home. There are also legal structures where fees are charged instead of standard interest payments.
Even though halal mortgages still end up costing money just like a conventional mortgage, the way those charges are structured makes a big difference, according to experts such as Hejazi.
“Many people will look at Islamic finance and say, instead of paying interest, you’re paying profits, so really it’s the same thing. And I think that’s disingenuous. … How you get to the outcome really matters, and there’s many, many religions where this is the case,” he said.
Harder to source money — so they’re often more expensive
Companies such as Oakville, Ont.-based Eqraz are just beginning to offer halal mortgages. Founder Zuhair Naqvi said with almost no marketing, his company is already seeing high demand.
Naqvi immigrated to Canada from Qatar in 2020, but had been working on launching Islamic financing in Canada for years before that.
“Canada is about 20 years behind on Islamic finance compared to other developed countries like the U.S. and U.K.,” said Naqvi.
Zuhair Naqvi is the founder of Eqraz, an Islamic mortgage provider in Ontario. (James Dunne/CBC)
As the market for Islamic finance is less developed in Canada, Naqvi said, finding halal and religiously acceptable sources of funding to lend out for mortgages has been difficult. This can mean costs are higher as funds are more scarce.
On top of this, there are additional administrative costs that must be spread across a smaller client base.
“We have to add a 1.5 per cent margin to cover our costs, so effectively, that makes our mortgage about four per cent more expensive than the RBC or Scotiabank five-year mortgage, as an example,” he said.
Higher risk for now, but that could change
The Edmonton-based Canadian Halal Financial Corporation is also offering halal mortgages. Co-founder Thomas Lukaszuk pointed out that the risk can be higher to lenders.
According to Lukaszuk, his company cannot foreclose on a home due to Islamic restrictions. This can mean higher charges to mitigate that financial chance.
“The risk is higher, hence the cost is higher … and we’re also dealing with a much smaller critical mass,” said Lukaszuk.
That critical mass of customers is smaller but it’s not unsubstantial.
According to Statistics Canada, out of more than 1.7 million Muslims, more than 800,000 live in a “tenant-occupied dwelling” rather than owning the home they live in.
For companies like Canadian Halal Financial Corporation or Eqraz, that represents a sizable target market.
Naqvi believes costs will go down as the business of halal mortgages grows, because to him, a larger pool of customers means a lower risk of default for lenders.
“With time, the bank and whoever funds Eqraz, or other Islamic companies, they will realize that the risk is not as high as they are calculating it to be, and the cost of the funding will therefore go down,” said Naqvi.
Established structures are still difficult to get through
Both Lukaszuk and Naqvi pointed out challenges around regulation and insurance in Canada.
Many mortgage insurance providers do not insure Islamic mortgages as a rule, because the legal structures can be different depending on the provider.
While a 2010 report for the Canada Mortgage and Housing Corporation said Islamic financial products should not “present any particular difficulties” under Canadian accounting standards, years later they are still far from widespread and there are legal issues that come into play such as who is registered on land titles, and whether a rent-to-own contract is subject to landlord and tenant legislation in various provinces.
Hundreds of thousands of Muslims are renters, according to Statistics Canada, and those who wish to move from renting to owning are the target market for halal mortgage companies such as Eqraz. (Ben Nelms/CBC)
“Another big challenge within Canada is the regulatory environment makes it more difficult to issue an Islamic mortgage relative to a conventional mortgage,” confirmed Hejazi.
Breaking into Canada’s financial circles presented yet another challenge for Naqvi.
“It was a people challenge as an outsider, as a new entrant to Canada, as a Muslim, to break into the circles of Bay Street in Toronto,” explained Naqvi.
“It took me more than two years to get the trust and acceptance of the people that are there,” he said.
Mohiuddin is ramping up his search for a home, now that there are more Islamic mortgage providers in Canada. (Peter Evans/CBC)
The Islamic mortgage market is developed enough, however, for Mohiuddin to prepare to enter the market himself. With several Islamic mortgage providers across the country, he’s more comfortable financing a home.
“I think I’m already looking at the houses in the market and if there is an opportunity, I think I will be putting out offers in a month or so,” said Mohiuddin.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
