The Majlis (parliament) on Tuesday agreed to raise the ceiling for security deposit loans to support low-income Iranians wanting to rent a dwelling place.
Henceforth banks should lend those in need up to 2 billion rials in Tehran City, 1.5 million rials in other big cities and one billion rials in smaller urban areas, IBENA reported.
Security deposit loans were announced by the former government in 2020 in the framework of the coronavirus aid package for the large numbers unable to rent a home due to the unprecedented increase in rents and home prices.
The loans will be paid to tenants but the amount will go into the bank account of landlords. The owner must return the principal (original sum borrowed) to the bank after one year while renters have to pay the installments over 12 months.
So far the loan was 1 billion rials in Tehran, 700 million rials in big cities, and 400 million rials in other urban areas.
According to the Central Bank of Iran, lenders gave security deposit loans worth 130 trillion rials ($254.9 million) to 224,460 applicants wanting to lease a housing unit.
Banks are obliged to lend in the form of as Qarz-ol-Hassanah (interest-free microcredit), or low-interest schemes, despite mounting concern about the detrimental impact on the already troubled and often-censured banking industry.
In the last fiscal year (ended March 20), banks gave 1,690 trillion rials ($3.3 billion) in social assistance loans to 1.94 million low-income applicants largely for youth marriage, childbirth and to those wanting to rent a home.
According to the CBI public relations department, banks accepted 824,900 applications for childbirth loan worth 330 trillion rials ($647.5 million) in the year.
Banks were ordered last year to lend to young parents to encourage childbirth. The money is given to couples who had a child in the previous fiscal year (March 2021-22) and after.
Some 1,230 trillion rials ($2.4 billion) were marriage loans to 896,000 applicants, up 55% year-on-year. Marriage loans are interest-free repayable in seven years. Couples can apply up to two years after the pronouncement of their marriage.
The government doubled marriage loans last year. In the March 2022-23 budget, each partner who ties the knot is eligible for 1.2-billion-rial loan. To help encourage marriage, lenders give 1.5 billion rials per partner if the bride is below 23 years and the groom under 25.
The subsidized loan schemes demanded from banks has undermined the already overstretched resources of most lenders and pushed many in a precarious situation.
Prominent economists and senior bankers have censured policy and decision-makers for imposing such obligations on banks to keep lending beyond their ability and capacity.
In fiscal 2023-24 banks have been ordered to allocate up to 2,000 trillion rials ($4.92 billion) in interest-free lending for government-led programs like loans to newlyweds, for childbirth and to support households struggling with the worsening cost-of-living crisis.
Per the plan, first-time parents are eligible for 300 million rials for the first child. They can receive 600 million rials for the second child, 900 million rials for the third, 1.2 billion rials for the fourth and 1.5 billion rials for five children and more. The loans are at 4%.
