This type of money is called earmarked money, which is money that its owner withholds for a specific purpose, such as performing Hajj, paying off debts, buying a house, or educating children. This type of money has conditions and rules related to each case:
1- The money is earmarked for one of the aforementioned purposes, but it is spent on that purpose or another before a complete Islamic lunar year has passed. In this case, Zakat is not required as the minimum amount subject to Zakat has been spent before the completion of a lunar year.
2- If the money is earmarked for a specific purpose and a lunar year has passed while it is in his possession, either in its entirety or in an amount exceeding the nisab, then there is a difference of opinion among scholars in this case:
– The majority of scholars agree that Zakat is due on this money at a rate of one-quarter of one-tenth (i.e., 2.5%) at the end of the lunar year, without distinguishing between different purposes.
– However, Hanafi scholars differentiate between what is a basic need, such as food, drink, and medicine, and what is not, such as renewing furniture, changing a car, getting a son married, or educating him. If the money is for a basic need, it is not subject to Zakat, but if it is for something else, then Zakat is due on it at a rate of one-quarter of one-tenth (i.e., 2.5%).
As for the subject of the question, we say: If this house that we are waiting to purchase is a basic need, such as if there is no other way to live in it except by purchasing it, or if the rental area is not safe, or if the family members have increased to a point where the current house cannot accommodate them, then in this case, housing is considered a basic need that is necessary, and the earmarked money is being used for a basic need. However, if the house is a luxury or an improvement, then the earmarked money is subject to Zakat, even if the search period is prolonged.
Fatwa by Dr. Khālid Naṣr