Construction Permits in Iran Increase in Fiscal 2017-18

EghtesadOnline: The Statistical Center of Iran has published its latest figures concerning construction permits, showing that the number of permits issued increased both across Iran and in Tehran during the previous fiscal year that ended on March 20, 2018.

News ID: ۷۴۶۰۱۸

17 September 2018

According to a report published by SCI on its official website, a total of 122,081 building construction permits were issued by municipalities across Iran's urban areas last year, up by 7.5% when compared to the year before.

A total of 9,316 building construction permits were approved by Tehran Municipality last year, indicating a year-on-year increase of 7.4%.

However, even as the number of building construction permits has gone up, actual homes that will be constructed through them will have a smaller share compared to the year before, Financial Tribune reported.

According to SCI, the number of residential units envisaged as part of the construction permits amounted to 322,962 across all urban areas in the country, showing a decline of 2.1% compared to the fiscal 2016-17. The average number of residential units to be built as part of each permit stood at 2.6.

In Tehran, the total number of projected residential units to be built through the permits issued in the fiscal 2017-18 stood at 65,118 that was lower by 1.4% compared to the year before. The average number of residential units per permit was seven.

Across all Iranian urban areas, the total floor area of units in each permitted building last year was equal to 59,746 square meters. That figure also indicated a 4.1% decline compared to the year before. The average floor area of units per each permit was 489 square meters, SCI reported.

The combined floor area of units to be constructed in Iran as part of the approved permits by the municipality in the fiscal 2017-18 was 11,823 square meters. That number signaled a steep decline of 11.5% compared to the fiscal 2016-17.

The average floor area of units permitted for construction in this period was equal to 1,269 square meters.

Recession Fears

These numbers become more significant when considering housing sector developments in recent months, which have had major repercussions for the general public and investors alike.

Since US President Donald Trump unilaterally withdrew from the Joint Comprehensive Plan of Action on May 8, Iran's currency has significantly depreciated, rocking several markets, including the housing market.

Due to huge price hikes, especially in the past three months, many people have turned away from properties, triggering fears that the housing market will once again become mired in a prolonged period of recession after exiting a five-year stagnancy only last year.

An analysis by the Iran Chamber of Commerce, Industries, Mines and Agriculture also pointed to this issue, saying the declining number of home sales has strengthened the possibility of recession revisiting the housing sector.

"Figures of home construction permits also indicate a decline in demand for construction during the previous year, meaning that fewer units will enter the market from last year's production," ICCIMA wrote in an article published on its official website.

The chamber adds that fewer newly-built residential units–that constituted a high share of demand in recent years–will enter the market this year because housing production is currently lackluster and cannot meets the real market demand.

In conclusion, the private sector entity pointed out that a decline in floor area of residential units to be built through these permits can be a sign of builders favoring the construction of units with lower floor areas that are more attuned to housing market demand.