38% Decrease in H1 Tehran Home Construction Permits

EghtesadOnline: The first half of the current Iranian year (March 20-Sept. 21) registered a 38% decline in the number of permits issued to home builders, says the head of Construction Engineering Organization of Tehran Province.

News ID: ۷۵۱۰۸۹

26 September 2020

Saeed Saeedian added that this has heightened concerns about the loss of jobs in engineering and construction, ILNA reported.

“As the largest organization affiliated to the private sector, the Construction Engineering Organization of Tehran Province has 120,000 members, of whom 70,000 are licensed builders,” he said.

Noting that the outbreak of coronavirus accelerated the shift to online services, Saeedian said his organization now offers 90% of its services electronically.

SCI on Q4 Fiscal 2019-20 Permits

The Statistical Center of Iran's latest data on home building permits show a total of 2,410 permits were issued by Tehran Municipality in the fourth quarter of the last fiscal year that ended on March 19, 2020, indicating a 5% increase over the preceding quarter (Sept. 23-Dec. 21, 2019) but a 10.1% decrease compared with the same quarter of the year before.

A total of 17,529 homes are expected to be built as a result of the permits issued in Q4 to register a quarter-on-quarter rise of 8.2% but a year-on-year decrease of 7.5%.

In Tehran, the total floor area of units in buildings with permits in winter stood at 3,107,000 square meters, registering a 0.5% QOQ and a 12.5% YOY decline.

The average number of residential units per permit in the capital city was 7.4 while the average floor area of units per permit stood at 1,192 square meters.

In the fourth quarter of last year, municipalities across the country issued 42,853 building permits, registering a 23.7% increase QOQ but a 14.1% decrease YOY.

A total of 103,166 housing units are expected to be built as a result of the permits issued across Iran’s urban areas in Q4, indicating a 21.3% increase compared with the previous quarter but a 10% decline against last year’s.

Across the country, the total floor area of units with building permits in Q4 was at 19,564,000 square meters, posting a 24.5% growth QOQ but a 10% decrease YOY.

The average number of residential units per permit across the country was 2.7.

The average floor area of residential units per permit was 462 square meters.

Tehran’s Construction Material Inflation at 29.3% in Q1

The general price index of construction materials for residential properties in Tehran stood at 536.5 in the first quarter of the current fiscal year (March 20-June 20),

During the four-quarter period ending June 20, the index grew by 29.3% compared with the previous year's corresponding period, according to SCI's latest report published on its website.

Compared with the previous quarter, i.e. the fourth quarter of last year (winter), the index saw a 17.3% rise. The construction material price index stood at 457.4 in last year's Q4.

The index rose by 31.9% during the first quarter of the current Iranian year that ended on June 20 compared with last year's corresponding quarter.

The category of “services” with a price growth of 25.8% compared with last year’s Q4 and a coefficient of 25.55% gave the biggest boost to the overall index in Q1. The index for this category stood at 435.1. The category witnessed a price hike of 27.1% compared with the previous year’s similar quarter. Its price index grew by 24.7% during the four-quarter period ending June 20.

"Cement, concrete, gravel and sand" ranked second in boosting the construction materials’ index with a price rise of 19.1% over that of previous quarter and a coefficient of 15.01%. The category’s index hit 481.2 in Q1, which was higher by 34.4% compared with the same quarter of last year. During the four-quarter period, the growth rate of this category's price index was 42.7%.

The category of “ironware, rebar, profile for doors, windows and fences” was the third group with the biggest impact on the overall residential construction material price index in spring. In Q1, the group's index stood at 611.6, which was higher by 10.8% compared with the previous quarter and 50.8% year-on-year. In the four quarters ending Q1, the group experienced a growth of 29.4% in its price index. The category has a coefficient of 18.15%.

In Q4, the categories of “glass”, “house paint” and “plasterwork” had the minimum impact on the index.

“Glass” price index stood at 460.8, which was higher by 14% compared with both the previous quarter and the same quarter of last year. In the four quarters ending Q1, the group experienced a growth of 16.9% in its price index. The category has a coefficient of 1.31%.

“House paint” price index stood at 681.6, which was higher by 8.1% compared with the previous quarter and by 11.6% year-on-year. In the four quarters ending Q1, the group experienced a growth of 20.7% in its price index. The category has a coefficient of 1.5%.

“Plasterwork” price index stood at 524.4, which was higher by 19.6% compared with the previous quarter and by 30.1% year-on-year. In the four quarters ending Q1, the group experienced a growth of 33.5% in its price index. The category has a coefficient of 0.96%.

The growth in prices of construction materials in the capital city was 1.5% above the inflation rate during the period under review.

The overall average goods and services Consumer Price Index in the 12-month period ending June 20, which marks the end of the third Iranian month, increased by 27.8% compared with the corresponding period of last year.

SCI had put the average annual inflation rate for the preceding Iranian month, which ended on May 20, at 29.8%.

The consumer inflation for the month under review (May 21-June 20) registered a year-on-year increase of 22.5% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending May 20 was at 21%.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 214.2 for the month, indicating a 2% rise compared with the month before.

Building Permit Fees in Tehran Up 30%

Building permit fees in Tehran has increased by 30% as of June 21 compared with last year. The decision was approved by Tehran City Council in the final month of last Iranian year (Feb. 20-March 19) as per Tehran Municipality’s budget for the current fiscal, but was not enforced until recently due to 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 ($160) per square meters. The average building permit fees hovered around 5-7 million rials ($17-25) per square meter last year.

Following the 30% increase, permit fees will reach 6.5-10 million rials ($23-35) per square meter. However, a report by Persian-language daily Donya-e-Eqtesad says, such fees will exceed 20 million rials ($71) in some northern districts of the capital city, particularly for high-rise building 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 built residential properties in slum areas were previously entitled to a 50% discount in permit fees, while 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 home owners 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 ($17,793) of the overall costs of developing a typical building in Tehran, i.e., a 4-5- story building comprising 8-10 residential units each with a floor area of 80 square meters constructed on 300 square meters 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 a hike in the prices of construction materials and land. Costs of construction materials, they say, are now 50% higher compared with the first half of last Iranian 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.

100% of Demand for Raw Materials Met Domestically

Iran’s building and construction industry supplies 100% of the raw materials it needs from the domestic market, says Jafar Sarqeini, the caretaker of the Ministry of Industries, Mining and Trade.

“Iran's steel, cement, tile and ceramic industries even produce more than twice the country’s domestic demand. Of $10 billion worth of exports by the mining sector in the last [Iranian] year [March 2019-20], exports of construction materials accounted for $7 billion. Iran is currently one of the major steel exporters in the region and one of the main exporters of cement in the world,” he said.

Sarqeini made the statements at the opening ceremony of the 20th International Exhibition of Building and Construction Industry and the ninth edition of International Exhibition of Elevators, Escalators, Conveyors, Spare Parts and Equipment, which opened concurrently at Tehran's International Fairgrounds on Sept. 10, Mehr News Agency reported.