Iran Gov't Reducing Construction Costs to Help Distressed Areas

EghtesadOnline: The government's initiatives, including urban development tax rebates and construction incentives, have significantly lowered construction costs to help distressed urban areas.

News ID: ۷۸۴۲۷۹

31 October 2018

"Even without considering the 500-million-rial ($3,570) loans offered [by state-run Bank Maskan] with the aim of renovating homes in distressed urban areas, the cost of constructing each square meter of a home in those areas is now 5 million rials ($357) lower than in ordinary areas," said Majid Rousta, a board member of the Urban Development and Renovation Company.

"Urban management entities must give up their profiteering view of urban development resources and look to public interests," a senior member of the company, affiliated with the Ministry of Roads and Urban Development, was also quoted as saying by IRNA.

About 2,700 neighborhoods spanning 140,000 hectares and housing more than 19 million Iranians are deemed distressed areas in need of renovation, according to Financial Tribune.

According to Rousta, Tehran Municipality and the Urban Development and Renovation Company have formed a workgroup that has currently prioritized 59 distressed neighborhoods for revitalization and construction.

He noted that organizing all distressed areas is next to impossible since they number at 2,700 spanning 140,000 hectares that house more than 19 million Iranians.

Based on the plan envisioned as part of the country's five-year development plans, the government is tasked with renovating 270 neighborhoods a year, meaning that all distressed neighborhoods must be seen to in the next decade.

Based on the executive decree signed by President Hassan Rouhani last year, a nationwide urban revitalization scheme was launched, which is slated to be implemented at a cost of 250 trillion rials ($1.73 billion) each year. Of this amount, the private sector is set to provide the highest amount of resources at 100 trillion rials ($693 million) while the government and municipalities will account for the rest at 80 trillion rials ($555 million) and 70 trillion rials ($485 million) respectively.

On Oct. 20, then-roads minister, Abbas Akhoundi, signed a trilateral agreement with the head of Plan and Budget Organization, Mohammad Baqer Nobakht, and head of National Development Fund of Iran's board of trustees, Morteza Shahidzadeh.

The agreement secures 700 trillion rials ($4.85 billion) worth of resources to kickstart urban revitalization projects that are expected to create 300,000 direct and indirect jobs.

Private Sector Participation

On Monday, a deputy roads minister said 50,000 residential units will be built through civil participation agreements with mass housing builders and private sector investments.

"Construction operations are underway in several cities and others will begin during the next few months," Habibollah Taherkhani, CEO of New Towns Development Company, was quoted as saying by ISNA.

The units are mostly focused in areas where construction of Mehr residential units are completed while the targets are average medium-income citizens.

The Mehr residential project is a controversial scheme initiated by the administration of Mahmoud Ahmadinejad. Criticized by many for draining government resources and the poor quality of housing units, the scheme has yet to be finished a decade after it started.

Since many Mehr residential units are built in faraway areas where urban centers are yet to be created, Taherkhani said the new units will be constructed with the aim of creating centers among Mehr units.

"Even as we have tried to build many schools, playgrounds and commercial complexes, the Mehr units are still far from meeting necessary standards, so we aim to create neighborhood centers through private sector investments," he said.

"We have targeted the construction of 30 neighborhood centers in new towns by the end of the [current Iranian] year [in March 2019]."