Economy, Business And Markets

MPs Criticize Mortgage Decision

MPs Criticize Mortgage DecisionMPs Criticize Mortgage Decision

Contrary to liberal experts hailing the Money and Credit Council’s new move to raise mortgage ceilings, two parliamentarians cast doubt whether the decision could have a positive impact on the struggling housing market.

According to the approvals of the council, mortgage ceiling would increase to 800 million rials ($27,000 at official exchange rate) for first time buyers in Tehran and to 600 and 400 million rials in big cities and towns respectively. The loan would be provided via the establishment of “housing deposit fund” in banks at an interest rate of 14 percent for 12-year repayment schedule.

Moreover, all private and state-owned banks are now free to grant home loans, in addition to the traditional mortgage provider Bank Maskan.

Rouhollah Beigi Eylanlu, an economic committee member in the parliament, warns that the ceiling increase can push up house prices. He argued that high installment payments and repaying more than twice the amount of the original loan is not in consonance with the MCC’s objective which is to help middle-income households buy a house, Islamic Consultative Assembly News Agency (ICANA) reported.

The lawmaker believes that the mortgage repayment schedule is not compatible with Islamic banking. “Banks should provide cheap loans but they are trying to maximize profit,” he added.

Mohammad-Ghasim Osmani, another MP who opposed the effectiveness of the MCC’s decision, said low and middle income households cannot afford the installments, warning that the move could lead to a foreclosure crisis.

The Central Bank of Iran has recently released a report saying that the average price of an apartment per square meter is 37.4 million rials in Tehran.