Iran's Tenancy Market Buoyed by Low House Purchasing Power

EghtesadOnline: A notable change in recent years, especially in the past few months, in Iran's housing market has impacted the tenancy market, considerably increasing the number of deals.

News ID: ۷۸۴۱۱۴

08 October 2018

The common way of purchasing a residential unit in Iran is to first reach an agreement with the person selling the house and then account for a portion of the price tag by including its rent.

The person renting the house is asked to provide a part of the tenement price in the form of a security deposit. The new home buyer would use that deposit to reimburse the remainder of the total value of the deal, the Persian economic daily Donya-e-Eqtesad reported.

The method is often used by prospective home buyers to make up for the fund shortage. However, people eying purchases of smaller homes are more inclined toward employing this method, according to Financial Tribune.

In fact, people with a low purchasing power who plan to buy a house with a floor area of below 60 square meters often opt for this type of arrangement.

Iran's housing market, especially in Tehran, has witnessed continuous price jumps. Due to an ongoing currency crisis spurred mostly by psychological effects of returning US sanctions, the purchasing power of people in the housing market has significantly dwindled, directing them toward smaller homes.

Another major group that was affected by price hikes is first-time homebuyers that tap into the resources offered by the Housing Savings Account. The account is an initiative offered by the state-run Bank Maskan that requires applicants to make down payments and wait for a year to become eligible for cheap home purchase loans.

Couples setting up such an account receive the highest amount of home loans offered in Iran at 1.6 billion rials ($11,850).

This amount may fail to adequately assist them in purchasing a house and even if they manage to afford a small house, they may find the loan repayment, which could require a monthly installment payment of 15 million rials ($111), to be difficult.

They may, therefore, opt to cover the installments by renting the house at a high security deposit.