Tehran Construction Material Inflation Hit 76.4 Percent

EghtesadOnline: The general price index of construction materials for residential properties in the city of Tehran, using 2011 as the base year, stood at 902 in the fourth quarter of last Iranian year (Dec. 21, 2020-March 20), according to the Statistical Center of Iran's latest report published on its website.

News ID: ۷۸۶۴۳۶

10 May 2021

During the four-quarter period ending March 20, the index grew by 76.4% compared with the previous year's corresponding period. Compared with the previous quarter, which ended on Dec. 20, 2020, the index saw a 6.1% rise.

In the third quarter, the construction material price index stood at 850.1 and registered a 21.6% quarter-on-quarter growth. The index rose by 97.2% during the fourth quarter of last Iranian year compared with last year's corresponding quarter.

In Q3, the year-on-year index growth was 101.6%.

The average annual inflation of construction material was 59.6% in Q3.

Compared with the previous quarter, the category of “glass” registered the highest growth among all categories of construction materials with a price growth of 28.1%. This is while “services” recorded the lowest index growth with 0.2% compared with the preceding quarter.

“Stone” witnessed the highest year-on-year inflation with 139.9% while “services” category registered the lowest year-on-year price growth with 40.3%.

The highest annual price hike was registered for “ironware, rebar, profile for doors, windows and fences” group with 119.6% and the lowest annual growth was posted by “services” group with 35.2%.

In the last fiscal year, Q4 witnessed the highest annual inflation of 76.4% and Q1 (March 20-June 20, 2020) saw the lowest annual inflation of 29.3%.

The highest quarterly inflation rate during last year was posted in Q2 (June 21-Sept. 21, 2020) with 30.3% and the lowest was registered in Q4 with 6.1%.

The highest year-on-year inflation for building materials was registered in Q3 with 101.6% and the lowest was posted in Q1 with 31.9%.

Bank Maskan Unveils Home Construction Loans

The managing director of Bank Maskan, the state agent bank of the housing sector, recently unveiled the bank’s agenda for the fiscal 2021-22, which aims to stimulate housing supply.

“Bank Maskan is planning to finance real-estate developers and encourage affordable housing projects with loan packages in line with the slogan of the new year: ‘Production, Support and Removal of Obstacles’,” Mahmoud Shayan was also quoted as saying by the news outlet of the Ministry of Roads and Urban Development.

Twelve categories of loans based on the credentials of the real-estate developer and the urban classification of the construction site have been outlined, he added.

Tehran, Isfahan, Shiraz, Mashhad, Tabriz, Karaj, Ahvaz, Bandar Abbas, Bushehr, Qom, Sari and Rasht make up the first category of urban areas and home builders in these cities will be offered the highest construction credit limit. The second category of urban areas consists of other provincial capitals and cities with a population of over 200,000 and the third category includes other cities.

Given the quality of construction and credentials of real-estate developers, four loan ceilings have been determined: Group I projects are carried out using new technologies by professional real-estate developers, Group II projects use new technologies by unprofessional builders, Group III are residential units that will be constructed by professional builders using new technologies and Group IV are residential units constructed by unprofessional builders without using new technologies.

Shayan said Group I and II builders in Tehran, Isfahan, Shiraz, Mashhad, Tabriz, Karaj, Ahvaz, Bandar Abbaover ($20,000) and 3,500 million rials ($16,200) in loans, respectively, for each residential unit, while Group III and IV builders will be eligible for 3,000 million rials ($14,000) and 1,200 million rials ($5,500), respectively, for each housing unit.

“Group I and II of builders in other provincial capitals and cities with a population of over 200,000 will be granted 4,000 million rials [$18,600] and 3,000 million rials [about $14,000], respectively. Group III and IV in these urban areas will receive 2,500 million rials [$11,600] and 1,000 million rials [$4,600], respectively, for each unit,” he said.

“Group I, II, III and IV of builders in other cities will receive 3,000 million rials [$14,000], 2,500 million rials [$11,600], 2,000 million rials [$9,000] and 700 million rials [$3,200], respectively, for each residential unit.”

Home Prices 500% Higher Than Construction Costs

The per square prices of homes in Iran are 500% higher than construction costs, according to Deputy Roads Minister Mahmoud Mahmoudzadeh.

Noting that exorbitant home prices are beginning to stabilize in recent months, the official said the only reason behind the wide gap between the construction costs and market prices of homes is the fact that housing is considered an investment vehicle, IRIB News reported.

According to the head of Construction Engineering Organization, Ahmad Khorram, each year, 100 million square meters of buildings have been constructed in Iran’s urban and rural areas.

“The average cost per square meter totals 50 million rials [over $230] in Iran, i.e., 60-65 million rials [$280-300] in cities and 30-35 million rials [$140-160] in villages,” he said.

“Engineering services account for 5-8% of construction costs in the world whereas in Iran they barely exceed 1%.”

During the last Iranian year that ended on March 20, 2021, the number of home deals finalized in Tehran totaled 83,303, which show a 0.3% decline year-on-year.

In the same period, the average price of each square meter of a home in the capital stood at 238.65 million rials ($1,100), signaling a YOY surge of 80.3% compared with the year before, latest data published by the Central Bank of Iran on Iran’s real-estate market show.

A total of 5,273 homes were sold in the capital during the 12th month of the last fiscal year (Feb. 19-March 20), registering a 34.6% increase compared with the preceding month but a 48.4% decline compared with the same month of last year.

The average price of each square meter of a residential property in Tehran stood at 302.74 million rials ($1,400) during the month under review, showing an increase of 93.7% over last year’s same month, as average prices were registered at 156.28 million rials ($720) then. Home prices in the capital city increased by 6.6% compared to 283.89 million rials ($1,300) in the 11th month of last year.