Is it Permissible to Invest in a Property Fund and What is the Zakat Liability on Such a Fund?
The question, as received
I have invested in a property fund which invests in commercial real estate and rents out these real estate on the high street. The portfolio consists of 96% property and 4% cash. Is this investment permissible? Is there Zakat on this fund?
The answer
The asset class of property is a lawful asset class for investment. A fund consisting of rental physical properties (brick and mortar) in its portfolio is a permissible investment as long as there are no other non-compliant factors. In terms of Zakat, you will only need to pay Zakat on the cash element in this fund. Therefore, if 4% of the fund composes of cash, you will pay Zakat at 2.5% of 4% of the value of your investment.
Condition: Permissible as long as there are no other non-compliant factors.
And Allah knows best.
Mufti Faraz Adam
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.