The Market Regulation Headquarters set the ceiling on rent levels for the current Iranian year (started March 21) at 25% in Tehran, 20% in cities with a population of over 1 million and 15% in other Iranian cities on May 19.
Tazirat (a judiciary-affiliated organization dealing with trading offenses) has been tasked with prosecuting real-estate agencies that contravene the regulation, Mehr News Agency reported.
However, Saeed Lotfi, a member of the Union of Real-Estate Agencies, believes that there is no mechanism to control new contracts.
“If the government is willing to control the rental market, it must strengthen infrastructures. Fortunately, we have the needed infrastructure such as the tracking code system and the Ministry of Industries, Mining and Trade has access to this database. However, the ministry cannot single-handedly enforce measures; other ministries, such as the Ministry of Economy and the Real-Estate Registration Organization of Iran must also get connected to our system,” he said.
“Landlords prefer to sign new lease contracts instead of renewing the old ones; they believe they can rent out their places at higher rates to new tenants. Rents did not rise in line with home prices in recent years; they are expected to increase to bridge this gap. As we speak, rent growth rate has reached 46% from last year’s 36%.”
Lotfi noted that the bank interest rate is 18%, while security deposit to monthly rent was calculated at 30% for years.
“Landlords, therefore, prefer to receive monthly payment of rents instead of security deposit; this can put financial pressure on tenants,” he said.
According to the Central Bank of Iran’s latest data, prices of rented residential units in Tehran and across urban areas increased by 45.6% and 50.1% respectively during the first month of the current fiscal year (March 21-April 20) compared with the corresponding month of last year.
Gholamreza Salami, a housing expert, says the increase in the prices of residential properties is usually viewed as a cause, whereas it is the effect of other causes that stem from government decisions.
“The cause [of the dramatic rise in housing prices] is obviously the misguided monetary and fiscal policies taken by governments, which manifest themselves in the form of runaway inflation and a decline in the purchasing power of the majority of people. We will understand how futile government efforts are to counter rent growth, if we acknowledge that rent growth has been driven by rising housing prices that have been driven by inflation which, in turn, has been contrived by governments,” he wrote in an article for the Persian economic daily Donya-e-Eqtesad.
CBI Raises Ceiling on Security Deposit Loans Again
The Money and Credit Council, a top financial decision-making body with the Central Bank of Iran, has given the green light to increase the value of security deposit loans to 1,000 million rials ($3,333) in Tehran, 700 million rials (2,333) in provincial capital cities and 400 million rials ($1,333) in other urban areas in the current Iranian year, Mahmoud Mahmoudzadeh, deputy minister of roads and urban development, said.
“The interest-only security deposit loans will be paid to individuals who have not taken out this loan so far. The repayment period of security deposit loan is five years,” he was quoted as saying by News.mrud.ir.
This is the second time the ceiling on security deposit loads are being raised this month.
Earlier in May, it was announced that the value of the loans would increase to 600 million rials ($2,000) in Tehran, 450 million rials ($1,500) in provincial capital cities and 350 million rials ($1,166) in other urban areas.
More than 450,000 households took out security loans in the fiscal 2020-21 and 2021-22, Mehr News Agency reported citing the Ministry of Roads and Urban Development.
The interest-only security deposit loans is paid in the name of tenants but placed at the disposal of landlord. The landlord is required to return the principal (the original sum of money borrowed) to the bank after the end of the lease agreement while renters pay the installments.
