The housing sector has registered a sharp inflation recently, which [prospective home buyers need to tackle either through their own financial resources or banks.
The effects of a sharp increase in inflation soon appear in the end price of housing. Under the circumstance, you cannot expect individuals to easily offset the deficit caused by the inflation. As this inflation was registered in a short period of time, no positive economic development is expected, Seyyed Mohammad Mortezavi, a board member of Iran Builders Association, said in a write-up for the Persian daily Jahan-e Sanat.
A translation of the text follows:
The wages of employees belong to a specific range and only increase once a year, so they are not proportional to the inflation rate. As a result, the number of home buyers in the housing market declines. That’s why home loans that are handed over to builders increase to compensate for the shortages and strengthen the demand sector.
A glance at statistics shows that banks are not capable of offering housing facilities and loans matching the 50% inflation rate. The government keeps threatening banks that fail to provide facilities, but they cannot comply with the government’s orders because of two reasons. First, there are no financial resources in banks that have spent them on other commercial, economic and industrial sectors. Banking resources have been exhausted and there are no new fundind, unless those loaned to applicants are repaid to the banks.
Second, apart from Bank Maskan, the state agent bank of the housing sector, other banks are reluctant to enter the housing sector because the repayments of home loans are different from other kind of loans. Banks despise loans with a 20-year repayment period.
Bank Maskan is a specialized bank [of the housing sector]. As per the approach followed by this bank, installments should be paid in parallel with the payment of facilities to builders. The point is that Bank Maskan has used up all its financial resources in the National Housing Plan.
At present, Bank Maskan does not have any resources to inject in real-estate development by private sector builders.
The only option left, according to economy minister [Ehsan Khandouzi], is for the government to give a leg up worth billions of rials to Bank Maskan. This amount has yet to be allocated to Bank Maskan. However, this sum, even if supplied, won’t be sufficient to finance the government’s ambitious initiatives and the 50% increase in the ceiling of housing facilities.
We have now reached a point where there are practically no sufficient resources to finance housing production in the form of real-estate support plans by fiat, neither by Bank Maskan nor non-agent banks.
