Iran: Housing Projects Juxtaposed

EghtesadOnline: The online enrollment for the government-backed housing development project, the so-called “National Housing Project” started on Saturday.

News ID: ۷۴۸۹۶۷

16 November 2019

However, the question which has not been clearly answered so far is how different it is from the controversial Mehr Housing scheme initiated by the government of former president, Mahmoud Ahmadinejad?

In 2007, Ahmadinejad offered free land and cheap credit to contractors in a bid to provide two million low-income Iranians with housing units. But that national project slowed down due to lack of finances.

The officials of President Hassan Rouhani's first government, particularly his former roads minister, Abbas Akhoundi, repeatedly blamed the project for having injected too much money supply to the market and having pushed inflation as high as 40% as a result of the government’s massive borrowing from the Central Bank of Iran, according to Financial Tribune.

Now Mohammad Eslami, Akhoundi's successor, seems to be willing to represent the National Housing Project as his signature achievement as the roads and urban development minister.

“We are intent on carrying out this project for years to come. All first-time home buyers should have the opportunity to benefit from this project,” he was quoted as saying by Mizan Online.

The National Housing Project is different from Mehr Housing Project in terms of the appearance of houses, the amount of down payment applicants must make, location and the method of construction, a report by IRNA reads.

The main difference between the two projects is that the National Housing Project is designed in accordance with the applicants’ affordability in paying loans’ installments.

Mehr Housing Project was designed for low-income people whereas the National Initiative’s target groups are households of different income deciles.

For example, a part of the new housing project has been designed in the form of partnership agreement with real-estate developers for people who are capable of repaying larger loans but cannot buy bigger homes from the housing market directly.

For individuals who can’t afford huge upfront payments, the government has proposed land development rights for a lease of 99 years, the longest possible term of a property lease.

Another distinct difference between the two projects is that under the National Housing Project no home will be built without a ready, willing and able buyer waiting to purchase it. In other words, needs analysis process will be conducted and applicants must be registered first before the construction phase starts. That’s the reason behind the launch of a dedicated website at Tem.mrud.ir.

The timeline for the National Housing Project is two years, meaning that homes should be delivered to the applicants within two years since the agreement was signed.

Under Mehr Housing Project, residential units were delivered to buyers based on the amount of their upfront payments: with larger down payments, applicants were far more likely to receive their homes sooner.

For instance, at the beginning of Mehr Housing project, a 75-square-meter house was delivered to an applicant at the end-price of 120 million rials ($1,052). The price of the same house would increase to 700 million rials ($6,140) a few years later.

Scheduling is a significant factor in real-estate development, therefore the government is planning to enjoy the expertise of professional, trustworthy and reliable mass builders lest the National Housing Project suffers the same fate as the protracted Mehr Housing Project.

The contractors of Mehr Housing Project have yet to deliver all homes they committed to the applicants.

One main criticism leveled at homes built under the Mehr Housing Project was their dorm-like appearance. Homes of the National Housing Project won’t look like one another; they will have different shapes, structures and facades.

Under the National Housing Project, the customer will put down 30% of the construction costs as deposit with designated banks; the sum would serve as a reliable source for the construction project. Loans worth between 750 million rials ($6578) and 1,000 million rials ($8,771) at the interest rate of 18% will be granted to the applicants.

Interest rates of home loans paid under Mehr Housing Project ranged from 4-12%.

Being married or the breadwinner of the family, having no record of using governmental financial facilities for purchasing a house since February 11, 1979, and having lived for at least five years in the city where the housing applications are being submitted are three eligibility requirements for the National Housing Initiative.

The new project is aimed at supplying a total of 400,000 affordable homes to the market, the construction of 180,000 of which has already begun.

Out of the total of 400,000 homes planned under the new housing project over two years (March 2019-2021), New Towns Development Company will build 200,000, the Urban Development and Renovation Company 100,000 and the Housing Foundation of the Islamic Republic of Iran will build the remaining 100,000 residential units over three years.

Nearly 20,000 of these residential units will be constructed in new satellite cities, including 7,134 in Fooladshahr in Isfahan Province, 4,448 in Parand in Tehran Province, 2,762 in Golbahar in Khorasan Razavi, 1,547 in Sahand in East Azarbaijan Province, 1,497 in Sadra in Fars Province, 800 in Amirkabir in Markazi Province, 520 in Hashtgerd in Alborz Province, and 150 in Pardis in Tehran.