The volume of loans furnished in Q1 shows a 70% rise compared with the corresponding period of last year.
Bank Maskan accounted for 53% of the total loans paid by the country’s banking network to the housing sector during the three-month period (136.45 trillion rials/$586 million).
According to a report by the Central Bank of Iran, banks and credit institutions in Iran paid a total of 2,247.8 trillion rials ($9.6 billion) in loans in Q1.
At present, the share of the housing sector (construction, home loans and repair loans) in total banking facilities is as little as 6% compared with over 15-20% in the decade leading to 2011, Hibna reported.
The value of loans allocated by Bank Maskan to applicants in the last fiscal year that ended on March 19 increased by 17.5% compared with the year before. The lender handed out 636,723 counts of a variety of loans worth 301,360 billion rials ($1.29 billion) in the fiscal 2019-20.
The loans, extended to home construction, require no down payments or initial deposits, in addition to those for the purchase and renovation of homes.
Last year (March 2019-20), Bank Maskan’s branches throughout the country doled out 40,801 loans worth 49,070 billion rials ($210 million) for boosting the construction of residential units, registering a 39% increase in number and a 58% growth in value compared with the year before.
The number of loans granted for home purchases totaled 228,949 worth 96,740 billion rials ($416 million) in the last fiscal year, indicating a 31% decrease in number year-on-year.
In the case of home renovation facilities, Bank Maskan provided loans to 189,174 applicants worth 46,340 billion rials ($192 million) during the period, registering a year-on-year growth of 16% and 64% in number and value respectively.
Interest-free loans for applicants getting married, apart from loans for completing the construction of homes, were allocated to 40,183 applicants in the last fiscal year. The total value of these loans stood at 12,560 billion rials (about $54 million).
Demise of HSA Mortgages Looming Large
Registration for new applications for Bank Maskan’s Housing Saving Account mortgage initiative closed on June 8, 2020.
“Despite our recent correspondence with the Central Bank of Iran, the monetary policymakers have not announced a decision on whether the state’s agent bank of Iran’s housing sector is allowed to continue with the homeownership banking scheme,” Mohammad Hassan Moradi, a senior official with Bank Maskan, said back then.
The Housing Savings Account initiative, launched on June 8, 2015, was scheduled to continue for five years with the aim of providing first- time homebuyers with loans at cheaper lending rates compared to all other loans offered by banks and lending institutions.
When the scheme was first introduced, the loan’s interest rate was set at 14%. In February 2017, after a directive by the Money and Credit Council, they were reduced to 9.5% in general cases and 8% for home purchases made in rundown parts of the cities.
“A total of 658,000 applicants have opened accounts with Bank Maskan for HSA mortgage since the inception of the program. Thirty-two percent of half of those who made the initial deposit [as the other half still have to wait until they can take out the loan or have otherwise refrained from coming forth] have received the home loans while 19% withdrew from the program,” Moradi said.
Although new registration has ended, the older commitments of Bank Maskan to HSA depositors remain in place.
Noting that the maturity period of about 323,000 deposits has not been reached yet or their holder are yet to continue with the process, the official said, “If the current trend continues [32% taking out the loan compared with 19% canceling their contracts with Bank Maskan], a total of 400,000 will have received home loans under the HSA initiative,” he was quoted as saying by the news outlet of the Ministry of Roads and Urban Development.
HSA was in full glory in the year ending March 2018; the scheme reached the crest of its popularity both in terms of the number of registrations and the number of loans offered in that year, thanks to the stability of prices and the housing market then.
As home prices rocketed into the stratosphere in the year ending March 2019, applications for HSA mortgage declined by 50% in Tehran and 30% in the country compared with the preceding year.
This downtrend continued into the fiscal 2019-20 with further increases in home prices, the declining purchasing power of applicants and the fact that HSA now only covers a meager share of the total price of homes on sale: applications dropped by 64% in Tehran and 60% elsewhere in the country year-on-year, the Persian-language daily Donya-e-Eqtesad reported.
Statistics show that the average deposit period for which first-time home buyers waited to receive the loan was around 18 months over the past five years. Thus far, one out of five people, who registered for the loan, has received it.
It is noteworthy that the one-year maturity of some savings has not yet been redeemed. However, the main reason behind the drop in the popularity of HSA lies in the fact that investing in this program no longer makes financial sense.
Since the year ending March 2016 to the year ending March 2020, the average home prices have increased 3.2-fold in Tehran and twofold in the country while the amount of the loan has remained unchanged.
The scheme requires applicants to make an initial deposit (400 million rials/$1,719) and wait out the one-year maturity period for credits with a ceiling of 800 million rials ($3,439 plus the depositor’s down payment) in the capital Tehran.
In towns with a population of over 200,000, the loan cap is at 600 million rials ($2,579). Buyers in towns with a population of less than 200,000 can apply for a maximum 400 million rials ($1,719). First-time prospective homebuyers also have to purchase new homes of 15 years or less to become eligible for HSA loans.
HSA is said to be mostly a self-sustaining fund since all the resources it absorbs are redirected to boost the financial strength of Bank Maskan for it to be able to support prospective homebuyers through cheap facilities. A part of its resources are provided via repayment of loans granted under another government-backed scheme, i.e. Mehr Housing Plan.
The Mehr project was a large-scale construction program initiated in 2007 by the administration of former president, Mahmoud Ahmadinejad, to provide two million low-income people with housing units through free land and cheap credits. It was scheduled to be concluded in five years.
The multibillion dollar housing plan for low-income families did deliver housing to many deserving people, but it had more than its share of controversy.
As if the multiple problems were not enough, a large number of people who made advance payments have yet to receive the key to their homes almost 12 years into the project.
There is speculation that the current housing officials prefer to redirect Mehr Housing Plan resources [from repayment of loans] into their own version of affordable housing project, known as “National Housing Initiative”, than to invest in HSA mortgage initiative. Under this initiative, the government has committed to supplying a total of 400,000 affordable homes to people.