The Money and Credit Council on Tuesday agreed to raise the ceiling of mortgage loans after months of debating to help the housing market out of recession by stimulating demand. All private and state-owned banks are now free to grant home loans, according to the new approval of the council. So far, Bank Maskan (Housing Bank) has been the only provider of the loans.
The mortgage ceiling in Tehran, which had been unchanged at 350 million rials ($12,000 at official exchange rates) since December 2013, will now reach 600 million rials. The loan limit in big cities is also set to increase to 500 million rials and in towns to 400 million rials, according to ISNA.
The MCC agreed that banks can establish a “housing deposit fund” to raise money for home loans, a plan that was proposed by the ministry of roads and urban development last year.
According to the new plan, applicants would be granted mortgage only after making deposits in a commercial bank for at least one year.
Peyman Ghorbani, deputy governor of the central bank, said the applicants are required to deposit half the amount they are going to receive for a year or more.
Under the new approval, banks are allowed to provide 800, 600, and 400 million rials in loans to first time buyers in Tehran, big cities and towns, respectively. They must repay the loan within 12 years at an interest rate of 14 percent.
No further details have yet been released on how exactly the fund will operate. But the council has put conditions for the homes to be purchased; they should be three years old or younger and not larger than 75 square meters, according to Mohammad Hashem Botshekan, the chief executive of Bank Maskan.
Under the new approval, banks are also allowed to cover up to 80 percent of housing construction costs. Ghorbani said for construction loans, commercial banks will not require applicants to make bank deposits as prerequisite. He said the interest rate for these loans would range between 21-24 percent.
