The annual construction of one million housing units under the new government plan named “Surge in Housing Production” is achievable but the lack of amenities such as water, electricity and natural gas will impede the project, Mohammad Atabak, the deputy head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, says.
One week into office, Minister of Roads and Urban Development Rostam Qasemi said in a televised interview that in view of the available means, he believes that the construction of one million housing units per year is possible.
“Not only the provision of building materials needed for the construction of one million housing units is doable, but it is also possible to export building materials,” he said.
The TCCIM official, who has years of experience in real-estate development under his belt, believes that building materials produced in Iran are sufficient to meet the needs of the project but not under the current circumstances where steel and cement factories are grappling with electricity outages.
“Unless the shortcomings in the provision of energy [electricity and natural gas] are plugged, carrying out the project could be challenging,” he was quoted as saying by Tccim.ir.
Summer demand has led to a severe power and water shortage in the past few months in most regions, resulting in blackouts and dry taps. Electricity consumption on June 20 surpassed 62,000 MW. The new record came, after high temperatures nationwide drove electricity consumption to new heights. As the manufacturing of steel and related products is an energy-intensive process, steel and cement factories were subsequently restricted by the Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) and have been only allowed to work at a fraction of their capacity during specific periods. The abrupt ban on the two key sectors created a shortage of steel and cement in local markets and prices increased overnight, creating new problems for most construction sectors.
Noting that the success of this project will have a positive impact on society, Atabak said, “More than 800,000 residential units used to be delivered to people in the not-so-distant past. But, that trend lost steam and began to slide back in recent years. As we speak, demand for housing, particularly from first-time buyers, outnumbers supply; housing production should increase significantly to bridge the gap between supply and demand.”
The housing sector is a key driver of the economy and fires up various sectors, but policymakers need to consider the resources of the country.
The TCCIM official stressed that provision of land is the most important consideration in real-estate development.
“The construction of one million residential units will be next to impossible, if decision-makers fail to factor in land costs. All expenses associated with acquiring a given piece of property as well as costs related to readying the land for construction should be provided from governmental resources after weighing up factors such as the location of the project and ease of access to infrastructures,” he added.
Noting that Iran’s annual capacity to produce cement is over 87 million tons, Atabak said Qasemi has put the project’s needed cement at 32 million tons that is an unlikely figure for a single year.
“The building of one million residential properties with an average area of 70-80 square meters each would consume 20 million tons of cement at most, which volume could be produced provided the fuel and electricity needed by cement plants is supplied,” he said.
“The annual production of steel and steel products [beams and steel sheets] stands at 30 and 22 million tons, respectively, of which rebar, steel beams and L brackets account for 12 million tons. Given the installed capacity, steel factories are equipped to provide these raw materials, but again it depends on the supply of energy. Tile and ceramics can be supplied by local plants as well.”
Atabak said it is important to bear in mind that at present it is impossible to deliver on this promise, as it takes more than a year to build a house.
“The weakness of infrastructures is another threat to this project. We learned from Mehr Housing project that infrastructures were not adequate in many places of the country. Today, the state of infrastructures is worse than what it was at the start of Mehr Housing Project. A number of industries, for example, have lost their production capacity; their steel and cement output compared with their installed capacity has declined. Lack of infrastructures is in fact the main challenge facing the project,” he said.
The Mehr project is a large-scale construction program initiated in 2007 by the government of former president, Mahmoud Ahmadinejad, to provide 2.2 million low-income people with housing units through free land and cheap credits.
Pointing out that one million homes will increase the consumption of electricity, natural gas and water at least by 1-1.5%, Atabak said, “There is a potential to produce the needed building materials, but not when the electricity supplied to steel and cement factories is less than 10% of their demand. The production of factories has declined and prices of building materials have increased due to power outages.”
The TCCIM official said infrastructures and the method of financing the project must be designed specifically for the large number of people who have today lost their purchasing power to a great extent, adding that if the government fails to provide land, the partnership of targeted groups will be limited.
“Major housing projects were carried out in the past, thanks to the government policymaking and the execution of up to 90% of the projects by the private sector. I’m optimistic that the construction of small-scale residential properties designed by professionals and suited to the cultural and climatic context will resolve a part of housing shortage and create employment and prosperity. What’s needed now is not sloganeering but preparing a clear plan and taking lessons from previous experiences,” he said.
