The general price index of construction materials for residential properties in Tehran, using 2011 as the base year, grew by 88.4% during the four-quarter period ending September 22, which marks the end of the second quarter of the current Iranian year, compared with the previous year's corresponding period.
The annual inflation of construction material was 93.5% in Q1.
The index stood at 1154.2.5 in Q2 (June 22-September 22), according to the Statistical Center of Iran's latest report published on its website. Compared with the previous quarter, which ended on June 21, the index saw a 7.2% rise.
In the first quarter of current Iranian year (March 21-June 21), the construction material price index stood at 1,076.5 and registered a 19.4% quarter-on-quarter growth.
The index rose by 65.2% in Q2 compared with last year's corresponding quarter (year-on-year). In O1, the year-on-year index growth was 100.7%.
When compared with the previous quarter, the category of “cement, concrete, sand and gravel” registered the highest growth among all categories of construction materials with a growth of 18.2%. Meanwhile, “ironware, rebar, profile for doors, windows and fences” recorded the lowest index growth with 2.8% compared with the preceding quarter.
“Cement, concrete, sand and gravel” witnessed the highest year-on-year inflation with 144% while “ironware, rebar, profile for doors, windows and fences” category registered the lowest year-on-year price growth with 38.2%.
The highest annual price hike was registered for “ironware, rebar, profile for doors, windows and fences” group with 133.6% and the lowest annual growth was posted by “services” group with 40.4%.
Growth in Iran’s Construction Industry
Iran's construction industry is expected to have expanded marginally by 0.7% in 2020 - down from growth of 8% in 2019.
A report by Research and Markets expects the country's construction output to expand by 1.8% in 2021, before registering an annual average growth of 3.3% between 2022 and 2025.
This will be supported by investments in the energy, oil and gas, petrochemicals, infrastructure and industrial sectors. In an effort to boost the economy and improve infrastructure, the Iranian government aims to complete over 3,900 km of new railroads and roads by March 2022.
The outbreak of the coronavirus pandemic, along with the steep decline in oil and gas prices, has weighed on the Iranian economy, which was already battered by US sanctions that curb oil and gas exports. The economic weakness, coupled with the depreciation of the currency and rising inflation, further weighed on the construction industry's output last year.
Surge in Housing Production’
The Iranian Parliament’s double-urgency motion called “Surge in Housing Production” was recently approved by the Guardians Council, an oversight body that ensures laws are in line with the Iranian Constitution and Islamic law.
The proposal was first approved by the parliament in April and sent to the council but was returned to the parliament for some amendments. Now the Guardians Council has given the plan, which also happens to be one of the key campaign promises of the new president, Ebrahim Raeisi, its blessing.
The new law on “Surge in Housing Production” requires the government to engage in the construction of one million housing units annually. It has envisioned the formation of a so-called “Supreme Housing Council” at the highest tier of the government led by the president with the minister of roads and urban development as its secretary, along with 11 members of the Cabinet and the head of the Islamic Revolution Housing Foundation as its active members and one parliamentarian as observer member.
The establishment of a “National Housing Fund” with the aim of procuring and allocating financial resources has been included in the law as well; the minister of Roads and Urban Development will be the head of the fund’s board of trustees, Otaghiranonline.ir reported.
According to the new law, banks will be mandated to allocate 20% of their financial facilities to real-estate development annually. The banking system will be required to spend 3,600 trillion rials ($13 billion) on housing loans. That would be loans worth 4,000 million rials ($14,380) for each residential unit in urban areas and 2,500 million rials ($9,000) in rural areas.
Another article of the law requires government organizations and institutions to give their suburban lands (excluding agricultural lands and those protected for environmental purposes) to the Ministry of Roads and Urban Development under 99-year lease agreements. The law also says the provision of building materials such as cement and steel must be met through commodity stock.
“The engagement of the private sector and provision of land and loans are key elements of the law,” says Ali Nikzad, deputy parliament speaker.
“Banking facilities will be adjusted to the inflation in the coming years. Real-estate development will help create employment as the construction of 100 square meters of a residential unit generates 2.5 direct and indirect jobs.”
