$1 Billion NDFI Loan to Boost Homeownership

EghtesadOnline: The idea of tapping into the reserves of the National Development Fund of Iran to empower the country’s main initiative aimed at supporting first-time homebuyers and other housing applicants has reportedly gathered steam and may be finalized in as early as two weeks.

News ID: ۷۴۵۳۴۳

22 May 2018

According to a deputy minister of roads and urban development, the Central Bank of Iran has given its consent for $1 billion to be drawn from the country’s sovereign wealth fund and be redirected to the Housing Savings Account in Bank Maskan, the agent bank of the housing sector.

“After the CBI approval, the issue has now been referred to Majlis Development Commission and based on the request of the Ministry of Roads and Urban Development from the respected members of the commission, it has been decreed that the allocation of the sum will be put on the main agenda of the parliament and approved in two weeks,” Houshang Ashayeri was quoted as saying by the official news portal of the ministry.

The official, who is also chief executive of Urban Development and Revitalization Corporation, an affiliate of the Roads Ministry, said the measure will prove useful for Bank Maskan that will receive the money in the form of managed funds that will be spent to boost the capital of the bank and cover any deficits arising from the reduction in HAS loans, according to Financial Tribune.

Housing Savings Account was established three years ago and requires applicants, mostly first-time homebuyers, to make a down payment and wait for a year to become eligible for the cheapest loans in the country. Couples can apply together and get twice the amount, and home builders and renovators can also use the initiative’s facilities.

HSA lending rates have on several occasions been cut to make the loans more affordable, which currently stand at 8% and 6% in non-distressed and distressed urban areas respectively.

As the initiative has been met favorably by people and it was announced last week that close to half a million applicants have signed up for its facilities, the idea of using NDFI resources was floated months ago.

Home Loans’ Conditions Eased

On Monday, Bank Maskan announced on its official website that a previous condition restricting couples to only use home purchase loans once has been removed.

As of now, couples can choose to employ Bank Maskan home purchase loans a second time “provided a certain period has passed since the first use of facilities and their clearance of debts or transfer of facilities to someone else.

For HSA and other initiatives of the bank, at least five years must pass before applicants can receive another loan. In the case of housing bonds or civil participation facilities for home construction, applicants have no limitations in the number of times they use Bank Maskan loans.

According to a new directive approved by the board of the bank, couples that have used home purchase loans once cannot enjoy facilities offered by HSA because even as the first-time homebuyer condition was terminated for people living in distressed urban areas recently, those living in non-distressed areas still have to be first-time homebuyers.

Furthermore, couples looking to purchase or build a residential unit cannot have access to two counts of loans offered by HSA and another Bank Maskan fund aimed at saving money to build homes. However, to do so, they can use HSA in addition to housing bond facilities.

Banks Mandated to Give Renovation Loans

A board member of UDRC announced on Monday that banks have been obligated to dole out loans worth 500 million rials ($11,890) for the renovation of residential units.

Majid Rousta added that the facilities had been defined earlier, but there was no obligation as banks were instructed to pay them only “depending on the availability of resources”.

“Based on a directive by the Cabinet issued last night, it has been decreed that following the approval of the Money and Credit Council (Iran’s top financial decision-making body), the loan rates for renovating homes in distressed urban areas be set at half the amount of current lending rates,” he said.

At present, MCC-approved lending rates are at 18%, which is 3% higher than the 15% deposit rate. So the renovation loans will have to be allocated at an agreeable 9% interest and other expenses will be covered for banks by the government in the form of loan allocation subsidies.