Lending to boost the housing sector and help people buy homes is expected to increase sharply in fiscal 2022, according to a lawmaker.
As per the 2021-22 budget rules, Iranian banks are obliged to inject 1,600 trillion rials ($6 billion) to help home buyers, Mojtaba Yousefi said.
“Banks can grant housing loans equivalent to 20% of their total lending in the present fiscal year”, he was quoted as saying by IRNA.
If realized, the housing industry can pick up significantly compared to last year when home loans accounted for less than 7% of the total lending by banks.
The obligation applies to all commercial banks while specialized banks are exempt, except for Bank Maskan, which is the main mortgage lender.
The new decision is in line with efforts to boost the ailing housing sector as home prices, real estate and construction costs have shot up exponentially in recent years making it difficult, and for most people impossible, to have a shelter of their own.
The Majlis recently approved the founding of a specialized fund for the housing sector, the so-called National Housing Fund to “synergize, support and optimally allocate resources to housing sector”.
As for financial resources, the MP said banking resources will be made available to the NHF. In addition, the NHF is eligible for funding through other sources, including tax income from housing trade, interest on home loans and reimbursed home loans.
Legislative Backing
Banking support to the housing sector is based also on a set of rules known as “Leap in Housing Production Law” approved last year.
To help banks procure funding for housing loans, they can issue mortgage-backed securities (MBS) in compliance with regulations announced by the Central Bank of Iran.
A MBS is an investment similar to a bond that is made up of a bundle of home loans bought from banks that issued them. A mortgage bond is a bond backed by a pool of mortgages on a real estate asset such as a house.
Investors in MBS receive periodic payments similar to bond coupons. The investor who buys a mortgage-backed security is essentially lending money to home buyers.
The target of loans are eligible applicants under the government-backed National Housing Initiative. Under the NHI scheme, the government says it intends to build 400,000 affordable units for first-time homebuyers, namely the middleclass.
To finance the housing and construction sector, the government is also looking at the capital market. According to Alireza Nasser-Pour, the deputy chief at the Iran Mercantile Exchange, the IME is reviewing three major schemes to help people buy homes.
Plans include setting up housing funds, launching real estate investment trusts (REITs) and offering salaf securities contracts.
REITs pool the capital of big numbers of investors, making it possible for individual investors to make a profit from real estate investment -- without having to buy, manage, or finance the properties themselves.
Salaf contracts are similar to futures, with the difference being that the contract’s total price is paid in advance. As per the scheme, the total value of a housing unit or a construction project would be securitized and converted into marketable salaf bonds.