As part of the next year's budget bill submitted to the Majlis on Tuesday, fifty trillion rials ($446 million) will be allocated to Bank Maskan - the main housing bank – to help the government-owned bank increase its loans.
Provisions B of Note 8 of the 2019-20 fiscal budget bill stipulates that Bank Maskan’s existing debt to the Central Bank of Iran (up to 50 trillion rials) will be transferred to the government and therefore considered as capital increase for the home lender.
The debt was incurred as part of CBI's credit to the bank to help fund the controversial Mehr Housing Project (aka Maskan Mehr). The huge low-cost housing project, initiated by former president Mahmoud Ahmadinejad, took money from the central bank to the tune of 450 trillion rials ($4.4 billion). The money transfusion is said to be the largest of its kind by the government in post-revolutionary Iran.
The amount is to be added to Bank Maskan capital by government to build its lending capability. Although home prices have risen sharply in recent months, Minster of Roads and Urban Development Mohammad Eslami has said home loan ceilings will not be raised due to its inflationary effects. Instead lending for home constructions will get bigger.
The Mehr Housing project was initiated in 2007 to provide two million low-income people with cheap housing. President Hassan Rouhani has often castigated the scheme in its entirety but has said his government will wrap up the still pending project in the interest of the working class – the main beneficiaries of the project.
As per the provisions of the budget bill, Bank Maskan is obliged to lend to complete the unfinished units of Mehr Housing Project, complete urban renewal projects, help renovate worn-out urban textures, provide for structural and infrastructure expansion and implement a new housing project known as the Social Housing Scheme –undertaken to build homes for low-income groups.
Additionally, in next year's budget bill a 15 trillion rials ($133.9 million) has been proposed to help finance the housing sector in general. The sum is to be secured by selling or bartering land owned by the Ministry of Roads and Urban Development.
The proposed budget states that MRUD can allocate 15 trillion rials of the earnings sourced from its own income or selling its property via the New Towns Development Company and National Land and Housing Organization - two housing and development organizations affiliated to the key ministry.
Gov’t Repaying Debts to Banks
The head of Planning and Budget Organization Mohammad Baqer Nobakht said the government has repaid 290 trillion rials ($2.5 billion) of its debts to banks. “We are endeavoring to pay the debts in due course despite the obstacles,” he told state TV late on Tuesday.
In next year's budget there are initiatives to help production units. According to Nobakht, 650 trillion rials ($5.8 billion) in low interest loans, ex gratia loans, or managed funds has been proposed for manufactures.
Banking system earnings in the next fiscal is predicted to reach 1.06 quadrillion rials ($9.4 billion). This should mainly come from banks’ own revenues and contributions from other sectors (borrowing from domestic and foreign sources).
Close to 1.02 quadrillion rials ($9.1 billion) of this amount is to be spent on current expenses, 7.45 trillion rials ($66 million) on taxes, 95.5 billion rials ($852,000) on securities interest, 14.9 trillion rials on 50% special interest, 149 billion rials ($1.3 million) on other interest allocations, 25.8trillion rials ($230 million) on capital expenses and 381 billion rials ($3.4 million) on increasing current assets.
