New Incentives for Mass Housing Builders

EghtesadOnline: The Iranian Barter Market will see sales of construction materials on credit to real-estate developers introduced by the Ministry of Roads and Urban Development as per the memorandum of understanding signed on Tuesday.

News ID: ۷۸۵۴۳۱

29 February 2020

Builders who work in partnership with the ministry under the government-backed housing development project, the so-called “National Housing Initiative,” will get construction materials at a 15-30% discount on credit that could be repaid in three-year installments from the Iranian Barter Market, according to Financial Tribune.

According to Mahmoud Mahmoudzadeh, the head of the housing division of Roads and Urban Development Ministry, suppliers will receive a 5% commission on sales annually.

CEO of Iranian Barter Market Alaeddin Khataei said the mechanism will help factories, which are now operating at half their capacity, to increase their output and employment.

A total of 400,000 homes have been planned for construction under the Roads and Urban Development Ministry’s National Housing Initiative over two years (March 2019-2021)

The Iranian Barter Market is a virtual platform for the exchange of commodities in Iran.

The general price index of construction materials for residential units in Tehran rose 27.5% during the third quarter of the current Iranian year that ended on Dec. 21 compared with last year's same quarter.

According to the Statistical Center of Iran's latest report, the index stood at 422 during the period. The figure indicates a 3.7% rise compared with the previous quarter i.e. the second quarter of the current year, which ended on Sept. 22. The second quarter’s construction material price index stood at 407.

During the four-quarter ending Dec. 21, the index grew by 42.1% compared with the previous year's corresponding period.

The category of “ironware, rebar, profile for doors, windows and fences” with a price growth of 14.4% compared with Q2 of the current year and coefficient of 18% gave the biggest boost to the overall index in Q3.

The index for this category stood at 421.3, registering a price hike of 28.1% compared with last year's similar quarter. Its price index grew by 36.5% during the four-quarter ending Dec. 21.

The category of "services" ranked second when it comes to leaving an impact on the growth of construction materials’ index with a price growth of 3.7% over the previous quarter and a coefficient of 25.5%.

The category’s index hit 355.3 in Q3, which was higher by 26.4% compared with the same quarter of last year. During the four-quarter ending Q3, the growth rate of this category's price index was at 25.7%.

“Wood” was the third category with the biggest impact on the overall residential construction material price index in autumn. In Q3, the group's index stood at 585.6, which was higher by 6.5% compared with the previous quarter and a 32% year-on-year. In the four-quarter ending Q3, the group experienced a growth of 67.9% in its price index. The category has a coefficient of 7.8%.

The category of “cement, concrete, gravel and sand” with a 8.1% decline in price index and a coefficient of 15.1, and the “masonry, earthenware and brick” category with a 1.4% decrease in price index and a coefficient of 5.2 were the main laggards pulling the overall index growth down.

In Q3, the “cement, concrete, gravel and sand” category’s index was registered at 371.5, which was higher by 35% year-on-year. In the four-quarter ending Q3, the group experienced a growth of 46.8% in its price index.

The “masonry, earthenware and brick” group index stood at 342.2 in Q3, registering a 39.8% growth compared with the same quarter of last year. The group’s price index grew by 53% during the four-quarter ending Dec. 21.

Complimentary Construction Permits

Based on the other MoU signed on Tuesday regarding the government’s affordable housing project, the Interior Ministry agreed to call on municipalities to issue construction permits at no charge for low-income applicants who fall within the first to third income deciles and reduce by 50% for those of fourth to seventh deciles.

“Buying cut-price construction materials on credit, along with discount on construction permits and engineering services fees, will reduce the end prices of homes that will be built under the National Housing Initiative by 25%,” IRIB News quoted Mahmoudzadeh as saying.

A total of 2,116 permits were issued by Tehran Municipality in the second quarter of the current fiscal year that ended on Sept. 22, 2019, indicating a 4% decline over the preceding quarter (March 21-June 21, 2019) and a 26.8% decrease compared with the same quarter of the year before.

The average number of residential units per permit in Tehran was 6.9.

A total of 14,540 homes are expected to be built as a result of the permits issued in Q2, registering a quarter-on-quarter decline of 3.9% and a year-on-year decrease of 30.9%.

In Tehran, the total floor area of units in buildings with permits in Q2 stood at 2,667,000 square meters, registering a 4.1% QOQ and a 31.3% YOY decrease.

The average floor area of units per permit in the capital city was at 1,260 square meters.

In the second quarter of the current year, municipalities across the country issued 38,393 building permits, registering a 5.1% increase QOQ and a 14.8% rise YOY.

The average number of residential units per permit across the country was at 2.6.

A total of 98,659 housing units are expected to be built as a result of the permits issued across Iran’s urban areas in Q2, indicating a 3.1% increase compared with the quarter before and a 3.9% rise compared with the corresponding quarter of last year.

Across the country, the total floor area of units in buildings with permits in Q2 was at 17,773,000 square meters, posting a 1.3% growth QOQ and a 0.6% increase YOY

The average floor area of units per permit was 426 square meters.

Iraj Rahbar, vice president of the Association of Builders, said on Feb. 19 that municipalities have increased the costs of issuing construction permits by 30% since a week before, Fars News Agency reported.

“Prices of construction materials are also continuing to rise and this will eventually increase the end prices of homes despite the recession in housing market,” he said.