Building Permit Fees in Tehran Rise by 30 Percent

EghtesadOnline: Building permit fees in Tehran have increased by 30% as of June 21 compared with last year.

News ID: ۷۵۰۲۹۳

22 June 2020

The decision was approved by Tehran City Council in the final month of last year (Feb. 20-March 19) as per Tehran Municipality’s 2020-21 budget but was not enforced until now due to the coronavirus-related suspensions of housing projects.

Building permit fees depend on the floor area, scope of work and the type of building being constructed or altered. They form part of the overall costs incurred during the development of a built asset.

At present, overall construction costs in Tehran have increased to at least 45 million rials ($237) per square meter.

The average building permit fee hovered around 5-7 million rials ($26-37) per square meter last year. With the 30% increase, permit fees will reach 6.5-10 million rials ($34-52) per square meter.

However, a report by Persian-language daily Donya-e-Eqtesad says such fees will exceed 20 million rials ($105) in some northern districts of the capital city, particularly for high-rise projects.

In accordance with a memorandum of understanding recently signed between Iranian Municipalities Organization and Urban Regeneration Corporate Holding Company, affiliated to the Ministry of Roads and Urban Development, building permits in slum areas will be granted free of charge.

According to Deputy Roads Minister Mehdi Obouri, builders who intended to build residential properties in slum areas were previously entitled to a 50% discount in permit fees. The current MoU offers 100% exemption in permit costs.

“Fifty percent exemption in architectural and engineering expenses has also been envisioned in an agreement signed between Iran Construction Engineering Organization and the Interior Ministry’s Development Department to encourage homeowners in slum areas to rebuild their homes,” Obouri was quoted as saying by Iran Online.

Before the 30% increase, permit costs accounted for 5 billion rials ($26.315) of the overall costs of developing a typical building in Tehran, i.e. a building with 4-5 stories comprising 8-10 residential units with an average floor area of 80 square meters constructed on 300 square meters of land in popular districts of Tehran.

Besides building permit fees, real-estate developers say overall costs of construction are expected to increase on the back of strong growth in the prices of construction materials and land.

Costs of construction materials, they say, are now 50% higher when compared with the first half of last year (March 21-Sept. 22, 2019). The average price of a square meter of land in the year ending March 2020 increased by more than 90% compared with the year before. By June 20, land prices rose by 15% in some neighborhoods compared with March.

Tehran Real-Estate Market in Q4

The latest report by the Statistical Center of Iran shows the average price of each square meter of land or land of a rundown residential property (residential units that are considered old to a degree that only the underlying land is useful for construction) in Tehran went up by 43.1% during the fourth quarter of last Iranian year (Dec. 22, 2019-March 19) compared with the corresponding period of the year before. Prices increased by 11.1% compared with the preceding quarter (Q3 of the last Iranian year.)

The minimum price of each square meter of land or land of a rundown property in the capital city stood at 26.48 million rials ($139) while the maximum price was 750 million rials ($3,947), bringing the average to 208.15 million rials ($1,095).

The number of land deals made during last Iranian year’s Q4 decreased by 10.3% compared with the similar period of the year before but increased by 37.2% when compared with the third quarter of last year.

The average area of each dealt land or land of a rundown property in real-estate agencies across Tehran was reported at 235 square meters by SCI.

The report also shows the average price of each square meter of residential floor area in the capital city surged by 43.7% in Q4 on a year-on-year basis. When compared with the previous quarter, prices indicated a growth of 12.7%.

The minimum price of each square meter of residential floor area across urban areas during Q4 stood at 22.56 million rials ($118) with the maximum price registered at about 714.25 million rials ($3,759). The average price was about 153.34 million rials ($817).

In terms of the number of deals for residential floor areas, last year’s Q4 saw a rise of 12.8% compared with the Q4 of previous year. Against the Q3 of last year, the number of such deals registered an increase of 87.7%.

SCI put the average dealt floor area at 88 square meters while putting the average age of residential units at 11 years.

It also disclosed figures for monthly home rents plus 3% collateral legally paid to rent one square meter of residential floor area.

It reported that the average rent prices increased by 47.9% during last year’s Q4 compared with the Q4 of previous year while they grew by 14.9% compared with the third quarter of last year.

The minimum price of each square meter of residential floor area rented in Tehran stood at 36,000 rials ($0.19) with the maximum being registered at 2.7 million ($14.21), bringing the average to 507,465 rials ($2.67) per month.

Compared with the fourth quarter of the year before, last year’s Q4 rent deals decreased by 48.7%; they decreased by 50.4% compared with the preceding quarter.

SCI reported the average area of total rent deals at 84 square meters and put the average age of rental homes at 14 years.

All figures reported by SCI employ data extracted from the state-run Tenement Management Information System operated by the Ministry of Roads and Urban Development.

It has been established with the aim of making home purchase and renting deals more transparent and all certified real-estate agencies are legally required to register their deals in the system.

As sudden changes in the number of deals in major cities lead to a significant change in prices across a province or the whole country, the report uses a balanced weighted average for its reports to identify real price changes by eliminating the effect of home deals.

The related weights used were based on occupied residential units surveyed during a general census conducted in the fiscal 2015-16.