Construction Permits Up 34.5% in Q2

EghtesadOnline: Municipalities across the country issued permits for 137,431 housing units across Iran’s urban areas during the second quarter of the current fiscal year (June 21-Sept. 21, 2020), indicating a 34.5% increase compared with the previous quarter and a 39.3% growth compared with the corresponding quarter of last year.

News ID: ۷۸۵۷۸۶

19 January 2021

These and other related data were released in the latest report of the Statistical Center of Iran.

The average number of residential units per permit across the country was 2.8 and the average floor area of residential units per permit was 524 square meters.

A total of 13,822 homes are expected to be built as a result of the permits issued by Tehran Municipality in Q2 to register a quarter-on-quarter growth of 7.8% but a year-on-year decrease of 4.9%, the report said.

In Tehran, the total floor area of units in buildings stood at 2,426,000 square meters, registering a 6.4% growth QOQ but a 9% decline YOY.

The average number of residential units per permit was 7.6 and the average floor area of units per permit in Tehran was 1,334 square meters.

“The process of issuing building permits in Tehran during the third quarter of the current year (Sept. 22-Dec. 20) has been fast-tracked compared with Q1 (March 20-June 20) and Q2 (June 21-Sept. 21) of the current year but the number of building permits issued shows a 20% decline compared with Q3 of last year,” the head of Construction Engineering Organization of Tehran Province, Saeed Saeedian, was quoted as saying by Hibna.

The number of construction permits issued in Q1 and Q2 was 55% and 38% fewer than the corresponding periods of last year respectively, he added.

“The rise in prices of building materials, general inflation and increase in land prices and the fact that most construction projects were stopped or operated partially due to the outbreak of coronavirus are reasons behind the unusual state of housing sector this year. The recession, which has engulfed real-estate development, is evident in the number of construction permits,” Saeedian said.

Tehran Construction Material Inflation at 40.8% in Q2

The general price index of construction materials for residential properties in Tehran stood at 698.8 in the second quarter of the current Iranian year (June 21-Sept. 21, 2020), according to latest data provided by the Statistical Center of Iran.

During the four-quarter period ending Sept. 21, the index grew by 40.8% compared with the previous year's corresponding period.

The annual inflation of construction material was 29.3% n Q1.

Compared with the previous quarter, i.e., the first quarter of the current year (spring), which ended on June 20, the index saw a 30.3% rise.

In the first quarter, the construction material price index stood at 536.5 and registered a 17.3% quarter-on-quarter growth. The index rose by 71.4% in Q1 compared with last year's corresponding quarter.

In Q1, the year-on-year index growth was 31.9%.

Compared with the first quarter, the category of “ironware, rebar, profile for doors, windows and fences” registered the highest growth among all categories of construction materials with a price growth of 63.9%. This is while “services” recorded the lowest index growth with 5.5% compared with the preceding quarter.

“Ironware, rebar, profile for doors, windows and fences” also witnessed the highest year-on-year and annual price hike with 172.2% and 71.9%, respectively. “Glass” category registered the lowest year-on-year price growth with 31.3% and the lowest annual growth with 15.7%.

Building Permit Fees in Tehran Rise 30%

Building permit fees in Tehran increased by 30% as of June 21 compared with last year. The decision was approved by the Tehran City Council in the final month of last year (Feb. 20-March 19) as per Tehran Municipality’s 2020-21 budget, 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 ($173) per square meters. The average building permit fees hovered around 5-7 million rials ($19-27) per square meter last year. With the 30% increase, permit fees have reached 6.5-10 million rials ($25-38) per square meter.

However, a report by Persian-language daily Donya-e-Eqtesad says, such fees will exceed 20 million rials ($77) in some northern districts of the capital city, particularly for high-rise building projects.

Meanwhile, 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 intended to build residential properties in slum areas were previously entitled to a 50% discount in permit fees, but 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 ($19,230) of the overall costs of developing a typical building in Tehran, i.e., a 4-5-story building comprising 8-10 residential units with a floor area of 80 square meters, constructed on 300 square meters of land) 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 strong growth 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 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.