The Securities and Exchange Organization has announced an agreement in principle to launch a Real Estate Investment Trust (REIT) fund, the SEO deputy for supervisory affairs said.
Alireza Nasser-Pour said the REIT would be the first of its kind in Iran’s capital market to help fund housing projects.
“The fund will seek to diversify financing instruments and increase the share of housing in the investment portfolios,” Nasser-Pour was quoted as saying by the SEO’s News Agency.
REITs own, operate or finance income-generating real estate. Modeled after mutual funds, REITs pool capital from numerous investors. This makes it possible for individual investors to make a profit from real estate investment -- without having to buy, manage, or finance the properties themselves.
It is publicly traded on major securities exchanges and investors can buy and sell them like stocks. REITs typically trade under substantial volume and are considered highly liquid instruments.
Those in charge of the housing sector have focused on the stock market to secure much-needed funding for the home construction sector. Experts underscore the role of REITs in helping major housing projects, particularly those backed by the government.
Due to the failure of successive governments to boost low-cost home construction as expected, the housing market is facing a huge supply deficit accompanied with chronic inflation, recession and rapidly declining purchasing power of fixed-wage earners.
The pattern over decades has made it increasingly difficult (some experts say impossible) for the low-income strata to afford decent housing. The same is true about the leasing sector.
To improve funding decision-makers are trying to create a specialized exchange for real estate trade. The High Council of Securities and Exchange approved a plan to this effect in July 2020. But it has been in limbo.
If it becomes operational it would be the fifth bourse in the country after Tehran Stock Exchange, the junior equity market Iran Fara Bourse, Iran Energy Exchange and the Iran Mercantile Exchange.
As per the initial plan, main stakeholders in the real estate bourse would be the government, builders, contractors, banks and other state bodies with excess property.
