100-Day Housing Performance Outlined

EghtesadOnline: The Iranian government has managed to boost home ownership through allocation of bigger home loans at lower interest rates, which have significantly improved the real-estate market.

News ID: ۷۸۰۷۲۶

10 December 2017

As a result of the government’s policies since President Hassan Rouhani began his second term in August 2017, the volume of real-estate deals during the first eight months of current Iranian year to Nov. 21 across the country has registered a growth of 7.7% year-on-year, the government’s news website Dolat.ir reported.

This is while the price for each square meter of a residential unit in Iran during the period has also increased by 7.1% to highlight the fact that Iran’s housing market is on the path to recovery.

According to the Ministry of Roads and Urban Development, 165,000 loans will be extended as construction loans while loans to purchase homes will reach 186,000, Financial Tribune reported.

The government’s decision to increase the ceiling of home loans with lower interest rates has swayed Tehran’s housing market as more than 14,800 residential units were sold in the Iranian capital during the month ending Nov. 21 to mark an increase of 18.5% year-on-year.

Home Prices and Construction Permits

According to the latest figures released by the Central Bank of Iran–the entity in charge of releasing official economic data–the average price of an apartment in Tehran during the aforementioned month also reached 48.9 million rials ($1,192) per square meter, registering a 10.9% growth compared with the same month of previous year.

During this period, the average price of homes in Tehran and the number of sales increased by 7.1% and 7.7% respectively. The average price stood at 46.5 million rials ($1,134) while the number of deals exceeded 113,800 during the period.

As the statistics published by CBI suggest, the sale of small apartments accounts for a significant part of home sales during the eight-month period, which indicates that the loans are being allocated to the right groups of people.

According to CBI’s data, the downtrend in issuance of construction permits has stopped for more than a year after the number of construction permits issued in Tehran and other urban areas registered respective gains of 7.5% and 20.4% YOY in the previous fiscal that ended on March 20, 2017.

In the first seven months of the current fiscal year, the number of construction permits reached 31,000 while this number did not exceed 28,000 in the year before.

Some of the sector’s experts predict that the number of construction permits will reach 400,000 by the end of the current Iranian year.

Distressed Urban Areas

The government is offering incentive packages and subsidies for builders in distressed urban areas to correct the imbalance in housing supply and demand.

Bank Maskan, as the agent bank of the housing sector, is now offering loans for renovation of residential units in old parts of cities with an interest rate of 12%, much lower than the prevailing interest rate.

This is while Tehran Municipality’s stimulus package, which includes construction permit bonuses, 50-100% municipal tax exemption, special parking space allocation and discount on engineering services fees, would reduce 25-30% of the construction cost and make investment in those areas more lucrative than in other parts of the city.

The government has also promised to conclude Mehr Housing Plan by the end of the current fiscal year and continue to support renovation in distressed urban parts through allocation of cheap loans.

Despite the fact that the Iranian government has been recently dealing with a serious credit crunch, it has allocated 1.5 trillion rials ($35.7 million) worth of resources to renovation of old urban neighborhoods.

The government has also considered a total sum of 1.06 trillion rials ($25.2 million) as bonds to provide for Mehr Housing Plan’s infrastructures and as home loan subsidy for young couples.