Real estate and business fixed assets in the early Islamic economy from a Zakah perspective

Abstract

Purpose The face value of nonowner-occupied real estate and business fixed assets is excluded from Zakah, according to most Fiqh scholars who argue that it has not been explicitly ordered during the lifetime of Prophet Muhammad (sas). This study aims to test the hypothesis that the role of these properties in the early Islamic economy was insignificant and, therefore, differed from today. Design/methodology/approach A qualitative historical analysis of primary Islamic sources and narrations from early Muslim historiography has been conducted to understand real estate sales and rent, construction costs and the number and size of houses owned by the Sahabah. In addition, inheritance reports and land gift records have been examined to obtain relevant information about the value of real estate. As for business fixed assets, the type, number and wealth of craftspeople as well as their tools have been analyzed to reveal their significance in comparison with today. Findings The findings of this study confirm the hypothesis that real estate for investment purposes and business fixed assets were quasi-non-existent during the lifetime of the Prophet (sas) and, therefore, irrelevant from a Zakah perspective. Originality/value This study intends to be a catalyst for the reconsideration of Zakah on these items of wealth and contributes to the Fiqhi discourse.