Iran Capital Market Willing to Host Real Estate Deals

EghtesadOnline: Head of the Security and Exchange Organization -the sole supervisory body in Iran's capital market – said the capital market is ready to open new vistas to finance the housing sector using its own financial instruments.

News ID: ۷۴۶۳۱۶

10 December 2018

"There are no restrictions on the physical trading of residential units at the Mercantile Exchange and sellers who want to sell via the capital market must specify the structure, area, and land details of their  property", Shapour Mohammadi told Mehr News Agency.

He said the capital market has created tools to facilitate real estate deals. The tools include issuing mortgage backed securities, setting up real estate funds, and trading land and building investment funds shares, Financial Tribune reported.

He referred to MBSs as one of the popular tools but at the same time criticized the cumbersome rules of Bank Maskan - the main housing bank -  which has lengthened the issuing process. "Two series of securities have been issued so far and were welcomed by the buyers."

MBSs have been employed as a new financing method with the aim of empowering and increasing the lending capability of Bank Maskan, for the first time in Iran’s banking system. The directive for MBS issuance was approved by the Securities and Exchange Organization three years ago.

According to Mohammadi creating land and building investment funds is the second important capital market instrument for financing the huge housing industry.

Mohammadi listed real estate funds as the third financial tool available to the capital market to finance the housing sector. He said the presence of such funds in the capital market spawns collaboration between the capital market and housing market. "The shares of these funds are now being traded in the stock market", he said.

Revising Rules

The tools are appropriate and efficient but “we have to wait and see to what extent the capital market benefits from it and what measures the active players will take,” Mohammadi said.

He said the SEO is willing to revise existing regulations in order to improve the contribution of the capital market to housing sector.

As previously outlined by the deputy housing minister, Hamed Mazaherian, real estate funds are a form of investment funds that purchase a basket of assets in the real estate market and manage them in the rental market to turn a profit.

Data released by the Central Bank of Iran confirm that Tehran's housing market is in a state of stagflation.

The data covering the eighth month of the current Iranian year that ended on Nov. 21, show home prices in the capital increased while the number of property deals declined.

Only 6,855 home deals were concluded in Tehran for the month, signaling a year-on-year decline of 53.6% compared to 14,764 deals in the corresponding month last year.

The number of deals declined by 26.7% when compared with the preceding month (Sept. 23-Oct. 22).