The Ministry of Roads and Urban Development has finalized the first definitive list of vacant residential properties containing 1.17 million homes and sent it to the Iranian National Tax Administration.
After nine months since the self-declaration by homeowners via the National Property and Housing Database, http://amlak.mrud.ir, the first list of empty residential properties identified by the ministry was submitted to INTA on Monday to be taxed before the beginning of the new fiscal year (March 21), IRNA reported on Wednesday.
Officials with the ministry say the identification process of empty homes will continue as per Article 54 of Direct Tax Code (vacancy tax).
Heads of the households, whether homeowner or renter, were asked to register their properties online in two months as of April 8.
“Psychological propaganda created around the National Property and Housing Database has discouraged many people from submitting their housing information to the ministry; very few people have registered on the database,” former roads minister, Mohammad Eslami, was quoted as saying by Persian daily Etemad.
“Vacancy tax for real entities will be six times more than the value of the property’s rent in the first year, 12 times more than the value of rent in the second year and 18 times more than the value of rent in the third year. For legal entities, vacancy tax has been set at 12 times more than the value of rent in the first year, 24 times more than the value of rent in the second year and 36 times more than the value of rent in the third year,” Mahmoud Mahmoudzadeh, a former deputy roads minister, has been quoted as saying by IRNA.
The Guardians Council – an oversight body that ensures laws are in line with the Iranian Constitution and Sharia — approved the parliament’s bill on revisions to Article 54 of Direct Tax Code, i.e., vacancy tax in December 2020.
Abbasali Kadkhodaei, the council spokesman, tweeted that the parliament’s revised proposal on taxing empty homes was not found to be against the Iranian Constitution and Sharia.
Revenues that will be collected from the taxation of empty homes will go to the National Housing Fund to finance loans to low-income households, Mahmoudzadeh had said, noting that the National Property and Housing Database—http://amlak.mrud.ir was not designed solely to tax vacant homes; the main goal of designing the website was to identify the housing conditions of Iranian families for future plans.
“Article 54 of Direct Tax Code [vacancy tax] stipulates that the failure to register one’s housing information as per the instructions will result in the discontinuation of a number of public services, including cash subsidies, opening of bank account, getting a passport and vehicle registration services,” he was quoted as saying by Eqtesad Online.
Objectives
Taxing empty homes is aimed at increasing housing supply by lowering the exorbitant construction costs.
Latest data released by the Statistical Center Iran on the country’s real-estate market show the average price of each square meter of residential floor area in urban areas surged by 100.2% in Q1 on a year-on-year basis. Compared with the previous quarter, prices saw a growth of 12.2%.
The minimum price of each square meter of residential floor area across urban areas during the first quarter stood at 1.05 million rials ($3.79) while the maximum price reached 1.93 billion rials ($6,980). The average price was at 115.03 million rials ($416).
SCI also disclosed figures for monthly home rents plus a 3% collateral legally paid to rent 1 square meter of residential floor area. It reported that the average rent prices increased by 63.7% during the period compared with the Q1 of the year before and 23% compared with the fourth quarter of last year.
The minimum price of each square meter of residential floor area rented in Iranian cities stood at 2,508 rials (about 1 cent) with the maximum being 6.57 million rials ($22.15), bringing the average to 281,922 rials ($1.02) per month.
According to the Central Bank of Iran’s latest data, the average price of each square meter of a residential property in Tehran stood at 325.9 million rials ($1,179) in the ninth fiscal month (Nov. 22-Dec. 21), showing a surge of 21.1% over last year’s same month, when average prices stood at 269.06 million rials ($973).
Home prices in the capital city increased by 1.8% compared to 320.09 million rials ($1,157) in the eighth month of the current year.
Overestimation
Since the very beginning, housing experts had warned that identifying empty homes would be the main challenge in the way of enforcing vacancy tax.
Mehdi Soltan-Mohammadi, a housing expert, said the figure announced by officials as their initial estimate of empty residential units (2.58 million) was overly optimistic.
“We believe that Population and Housing Census is not an effective tool when it comes to identifying empty properties. Census takers who visit homes might record a home as vacant, if no one lives there or neighbors say so. The fact of the matter is that many of these homes might not be empty at all. Moreover, the housing market was in recession in the fiscal 2016-17, when the census was conducted, and a large number of new homes, including those built under the Mehr Housing Project, were unsalable. Statistics pertaining to that year falsely claimed that empty homes would solve the longstanding housing problem.”
Noting that the attractive aspect of investment in housing is gaining income from renting the property, Soltan-Mohammadi said homeowners forgoing the handsome rental income does not seem reasonable.
“It’s like buying shares or opening a deposit account but not seeking to make a profit. A small percentage of homes might be left vacant during repairs or house relocation or before being sold,” he said.
“Housing is a commodity purchased with the aim of making profit and using it. If there was no inflation, people would have preferred to save their money in banks, as the gross income from renting is 4% annually while monthly interest on savings stands at 20%. Dividing consumption demand and investment demand in the housing sector is not a clear concept. Speculative investment in housing increases when home prices rise rapidly. Not just the housing sector, other markets like gold, foreign currency and even car markets heat up, as people have to safeguard their money’s value.”
The housing expert said the best policy that the government could pursue is inflation control, for which the government has to work on all markets and create economic development and stability.
“Few countries have an inflation rate of over 40%. Challenges regarding the housing market won’t be resolved, as long as the prices of construction materials increase by 100%, or the costs of other construction inputs, including municipal duties, water and electricity charges, etc. keep rising,” he concluded.
