The government will allocate a fraction of the 750-trillion-rial ($3.34 billion) coronavirus bailout to renters, says Minister of Roads and Urban Development Mohammad Eslami.
The interest-only security deposit loans, in which the renters pay only the interest costs and not the principal, will be paid to landlords.
“Renters of homes with an area of less than 75 square meters in Tehran and 90 square meters in other cities will qualify for this type of bank facility. The landlord and renter need to sign an official contract before banks can begin the lending process,” he was quoted as saying by Mehr News Agency.
Mohammad Hassan Moradi, an official with Bank Maskan—the state-agent bank of the housing sector, said in view of the resources available, there will be a limit on the number of loans the creditor can provide.
Moradi added that financial resources needed to carry out this program must be provided through deposits.
“Bank Maskan believes that security deposit loans can be offered in the forms of Qarzol-Hassaneh loans [interest-free microcredit], interest-only security deposit loans or security deposit loans that require both principal and interest repayments. However, the Central Bank of Iran has yet to approve the type of such hypothetical loans,” he was quoted as saying by ILNA.
Gov't Puts Cap on Rent Increases
The Ministry of Roads and Urban Development has unveiled new guidelines meant to protect residential tenants affected by Covid-19.
Tenancy agreements signed as of June 29 may not increase rents by more than 25% in Tehran, 20% in large cities with a population of over one million, namely Mashhad, Isfahan, Tabriz, Ahvaz, Qom, Shiraz and Karaj, and 15% in other Iranian cities, Deputy Roads and Urban Development Minister Mahmoud Mahmoudzadeh, said.
The new guideline approved by the National Coronavirus Taskforce also suspends landlords' ability to forfeit a lease during the time the country is battling the health crisis plus three months after the Health Ministry declares the end of the outbreak.
However, the deputy minister noted that there are exceptions to the rule.
“The tenant must have delivered on their commitments during the current tenancy; in other words, they should not be recognized as a tenant in arrears by the judiciary. Moreover, those who have caused financial losses for the landlord won’t be entitled to the new measure,” he said.
“Once the landlord legally sells their property during the lease period, the tenant must move out within two months. The final exception is when the tenant refuses to accept the aforementioned legal rent increase. If the landlord asks for a higher rent [than what was approved], the tenant can refuse to pay the rent without facing an eviction notice.”
Asked if the new directive is legally enforceable, Mahmoudzadeh said no judicial authority is allowed to order the tenant to vacate the premises as per the new legislation.
“This is a decision made by the Supreme National Security Council of the Islamic Republic of Iran and it goes well beyond the jurisdiction of the Iranian Parliament. It does not violate either the rights of the landlords or tenants. Rather, it will soothe the sentiments of the rental market, particularly in large cities.”
Mahmoudzadeh noted that all residential estate deals, including home sale, rental and lease agreements, are required to be registered in the state-run Tenement Management Information System operated by the Ministry of Roads and Urban Development and obtain a tracking code as of June 29, IRNA reported.
In early May, the taskforce approved a self-executing two-month extension of rental agreements with the termination date falling between February 20 and May 20 to control the spread of coronavirus and help tenants battling job and income losses during the pandemic.
Expert Slams Gov't Intervention
A housing expert believes the government’s intervention in the lease market would cause confusion by increasing the share of unregistered, unofficial deals and price rises in the long run.
“Rental rates depend heavily on supply and demand. The government intervention in setting a ceiling on rent increases would lead to a decline in supply, surge in demand and eventually rent increases,” Mehdi Soltan-Mohammadi added.
“Changes in rents over the past 10 years have been in line with general price level of goods and services”
Soltan-Mohammadi said the most effective strategy to address rental market issues by the government is by controlling inflation.
“Imagine how difficult it is for the government to control automotive and gold coin markets over which it has a complete monopoly. How does it intend to oversee a market whose supply and demand are fully out of hand?” he was quoted as saying by Fars News Agency.
Latest data published by Central Bank of Iran on its website show during the third month of the current fiscal year (May 21-June 20), the price of rented residential properties in Tehran and across urban areas increased by 27.6% and 30.7% respectively compared with the similar month of last year.
According to the Statistical Center of Iran, the average Consumer Price Index for rents in urban areas during the four-quarter period to June 20, which marks the end of the first quarter of the current fiscal year (spring), increased by 22.7% compared with the corresponding period of last year.
SCI had put the annual inflation rate for the preceding quarter, which ended on March 19 (last year' Q4 in winter) at 23.2%.
The highest and lowest average annual inflation rates were registered for Lorestan and West Azarbaijan provinces with 35.8% and 9.5% respectively.
According to the SCI report, CPI for rent levels in urban areas (using the Iranian year to March 2017 as the base year) stood at 175.1 in spring, indicating a 3.4% increase compared with the previous quarter.
SCI had put the quarter-on-quarter rent inflation rate for the preceding quarter, which ended on March 19, at 4%.
Ilam and Lorestan provinces registered the highest and lowest quarter-on-quarter inflation rates for tenants in urban areas with 9.1% and 0.7% respectively.
The consumer rent price index in urban areas increased by 23.3% in Q1 over the same quarter of last year.
SCI had put the year-on-year rent inflation rate for the preceding quarter, which ended on March 19, at 22.9%.
The highest and lowest inflation rates on a year-on-year basis in the first quarter of the current year were posted by Lorestan with 35.8% and West Azarbaijan with 7.5%.
Significant Share of Households Live Off Rental Income
The head of Statistical Center of Iran says rental income accounted for 37.5% of the category entitled “miscellaneous sources of income” in the last fiscal year (March 2019-20).
Javad Hosseinzadeh added that sources of generating income for urban households in the last Iranian year were “paid-employment jobs” (32.5%), “self-employment jobs in farming or nonfarm payroll employment” (16.1%) and “miscellaneous sources of income” (51.4%).
The "miscellaneous sources of income" itself comprised of "rental income" (37.5%), "retirement income" (31.6%), "subsidies" (5.8%) and "other sources" (25.1%).
For rural households, sources of generating income were "paid-employment jobs" (30.7%), "self-employment jobs in farming or nonfarm payroll employment" (33.5%) and "miscellaneous sources of income" (35.8%).
The "miscellaneous sources of income" for households residing in rural areas comprised of "rental income" (27.3%), "retirement income" (20.1%), "subsidies" (17.7%) and "other sources" (34.8%), Hosseinzadeh was quoted as saying by SCI’s news portal.
