Banks should increase the share of housing loans from their total loans by four times to help meet the government's housing action plan, the CEO of Bank Maskan (main housing bank) said.
"Housing loans account for approximately 5.5% of bank lending portfolio. This is while lenders should raise this share to 20% in line with the government’s “Surge in Housing Production' initiative," Mohammad Shayan was quoted as saying by IBENA.
"In the past, banks were more inclined toward the key housing sector with 20% of loans. However, now they prefer to give money to other commercial sectors simply because mortgages are not feasible [profitable] given the long repayment period," Shayan said.
The Surge in Housing Production requires the Raisi administration to build one million residential units p.a. -- a tall order given the difficult economic conditions and expanding budget deficits.
Earlier in August, the parliament’s double-urgency initiative to boost home construction was approved by the Guardians Council, an oversight body that ensures laws are in line with the Constitution and Sharia.
The legislation calls for the formation of a “Supreme Housing Council” at the highest tier of the government led by the president with the minister of roads and urban development as secretary, along with 11 members of the Cabinet and the head of the Islamic Revolution Housing Foundation as active members, and one parliamentarian as observer.
According to the law, banks should allocate 20% of their funds to real estate development. Banks are required to give 3,600 trillion rials ($13.3 billion) in housing loans. In other words, 4,000 million rials ($14,814) to each urban residential unit and 2,500 million rials ($9,259) for the construction of a rural home.
Some economists and market observers say that the goal of building one million housing units can be is attainable but the lack of water, electricity and natural gas will be major challenges.
Price of Land
Experts are also concerned about the provision of land for the huge housing projects, saying that the goal is rather ambitious if, among other things, planners and policymakers fail to factor in land prices.
Land and home prices across the country have shot up to historic highs over the years making homeownership impossible for those at the middle and lower end of the economic ladder.
Shayan the banker claimed that expanding mortgages can and will make “a positive contribution in lowering inflation” because the key sector has a major impact on inflation.
The share of housing in Iranian households’ budget has reached unprecedented highs over the past several years. According to official data, households in urban areas spent an average 43% of their monthly income on rent in the calendar year ending March 2021.
It has been reported that housing constitutes 5% of the country’s gross domestic product directly and 12%-13% indirectly.
