Answer

In the name of Allah, the All Seeing.

I assume that you have brought both flats for business purposes as you have stated that you have given both flats out to rent. If this is the case then you will need to pay Zakaat on the amount of rent which you obtain from both properties. That is to say that the Zakaat will be calculated not on the value of both flats but on the rent value which you accumulate from the flats upon the completion of one full Lunar year.

However, from the outstanding amount, one years installments can be deducted from the amount that is due Zakaat assuming the loan is based on installments and the other property was bought from money already owned.

If this was also borrowed then it can be deducted from the Zakaat.

If the loan is not instalment based and needs to be repaid immediately then the total loan can be deductible.

(Al-Hidayaah Vol 1)

And Allah knows best
20th September 2005

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Mufti Abubakr Karolia
Batley, U.K
Founder of the "Islamic Foundation for Theology and Research" (I.F.T.A.R)