Plan of Action to Help Calm Housing Market

EghtesadOnline: The Ministry of Roads and Urban Development has devised a nine-point action plan to help balance the housing market that has seen more than its share of ups and downs in recent months as the country grapples with a major currency crisis.

News ID: ۷۴۵۵۸۴

07 July 2018

According to Hamed Mazaherian, MRUD deputy for housing and construction, the ministry aims to offer a tax incentive package to boost production of residential units, establish an electronic market and transfer responsibility of taxing vacant homes from the National Tax Administration to municipalities.

ISNA quoted him as saying at a meeting in Tehran that the ministry wishes to accelerate the process of ratifying a bill aimed at creating a momentum in residential unit presales, curb speculative activities related to the selling of property through tax and support construction of houses with smaller floor areas.

What is more, the MRUD will speed up the process of implementing its overall urban revitalization program, change the mandate of Bank Maskan, the agent bank for the housing sector, from a specialized bank to a development bank, and start offering state-owned land with the aim of increasing the supply of residential units built in line with higher standards, Financial Tribune reported.

Iran’s housing market, especially in Tehran, has undergone a rough six months, mostly due to fluctuations in the foreign exchange market and the systemic devaluation of the rial. The currency turmoil has been simultaneous with a long-awaited boom in the housing sector that came after more than five years of recession.

These factors have translated into massive hikes in home prices and rents. A report published by the Central Bank of Iran on June 27 showed that even as Tehran’s housing market became calmer in the third month of the current year that ended on June 21, it registered a whopping 45% annual price growth. On the other hand, homeowners are increasingly looking at their properties as capital and upping their rent for a public that is shockingly witnessing the rapid decline in its purchasing power.

Mazaherian in his remarks welcomed the 1.2% positive growth rate registered by the housing sector last year following years of contraction, but also referred to galloping home prices as a serious issue.

He pointed to the scheme to tax on empty homes –a long-promised and yet to be implemented initiative– as something that still lacks consensus, but has proven its worth on the international level.

Creating Value

During the same event, the Roads Minister Abbas Akhoundi said “there is no added value in speculative activities concerning land, but there is added value when it comes to homes, so we must link taxes to speculative demand instead of empty homes”.

He said the proposal has been conveyed to the government, and called for support from the private sector and real buyers and homeowners.

Regarding support for construction of smaller homes, Mazaherian explained that rising demand for such units is the main reason the ministry is focusing on the issue. “Family sizes have decreased, but it is strange that residential units in Iran are often bigger than 120 square meters”.

The deputy minister said “we must have a clear financing regime for the housing sector” in support of transforming Bank Maskan into a development bank. He also pointed out that the MRUD in principal is in favor of boosting the capital of the bank.

Establishing electronic markets, which is to be completely run by the private sector, “will alleviate our current problems in marketing homes”. He said the government will offer easy access to information to the private sector to develop online markets.

According to the official, the bill aimed at expanding housing presale deals has been sent to the parliament. Based on the bill, he claimed, the government will have “the least intervention in the deals” that must reduce the risk factor in home deals because they will be signed in official notary offices.

In outlining the urban revitalization plan, Mazaherian pointed out that the government has targeted renovation of 270 neighborhoods each year as approved in the Sixth Five-Year Economic Development Plan (2017-22).

In conclusion, he pointed to the initiative to offer state-owned lands, and said, “Government companies have land in cities that must be divested to the private sector in support of production of homes” as this will help strengthen the home construction industry and its conformance to higher standards in the interest of homebuyers.