The Renovation Organization of Tehran (ROT) is planning to launch a new housing scheme via the Iran Mercantile Exchange (IME) using salaf contracts backed by one square meter of a housing unit.
Mehdi Hedayat, the ROT head, said the aim is to attract small investments and help the people to gradually own their homes, newswires said.
"Housing projects of the Tehran Municipality will be offered via the IME," he said, "The projects are mostly located in low-cost areas such as districts 10, 11 and 19."
"However, prices are not set yet," he said without providing details about the scheme. Selling real estate via the stock market has been on the agenda of past governments.
The IME last year said that it had plans to use standard salaf contracts to fund housing and construction projects.
Standard parallel salaf is an Islamic contract 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 will be securitized and converted into marketable salaf bonds. The bonds will be issued by builders and offered in the stock market.
Each salaf contract will be backed by one square meter of a housing unit and each contract subject to the price of one square meter of a defined housing unit at the time of offer.
Investors who buy the contracts will receive the housing unit on maturity date if they own enough contracts that cover the total carpet area.
If the salaf contracts are not enough to buy a home, the prospective owners can sell it at the market rate before or on maturity date.
According to market officials salaf contracts by nature can cover the risk of rising real estate prices over time. By buying salaf contracts investors can benefit from the added value of real estate.
The plan was to be vetted by the Jurisprudential Committee of the Securities and Exchange Organization to conform with Islamic law.
IME is a commodities exchange in Tehran founded in 2006 to host deals in farm, industrial and petrochemical products in the spot and futures markets.
In 2020 The High Council of Securities and Exchange decided to set up a specialized exchange for real estate trade, though it is not established yet.
The potential real estate bourse is set to help address the mounting challenges of the low-cost housing industry by making the market competitive and improving transparency.
Housing in most big cities has emerged as a major crisis with prices going through the roof in the past few years. Buying or renting a home has become prohibitive for all those at the middle and lower end of the economic ladder.
