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Leasing Firms May Get Involved in Housing Market

Leasing Firms May Get Involved in Housing Market Leasing Firms May Get Involved in Housing Market

The government and Central Bank of Iran are considering a plan proposed jointly by the housing market’s leasing firms and mass builders to financially empower potential home buyers and  sellers that may be  financially constrained.

The new plan, if approved, would allow leasing firms to provide loans covering up to 70 percent of a home price. The loans will have a 21-percent interest rate and the repayment period could vary between five and 12 years.

Unlike the housing deposit fund, which has newly been introduced to the banking system to boost demand, the new proposal seeks to help both the supply and demand sides at the same time, Donya-e-Eghtesad newspaper reported on Saturday.

The first legal home leasing firm was launched in 2009, but the former administration banned the firms’ participation in the housing market, arguing that their involvement could push up the prices, which were already high at the time. In recent years, however, the housing market has been in recession and the leasing companies, as a result, have become reluctant to enter it. Gold and foreign exchange markets seem to have had higher return rates than the housing market so the leasing firms have preferred to get involved in speculative activities.

The leasing firms now argue that even if the law allows them to resume operation, their resources should be provided by the owners only. Otherwise, granting 21 percent interest loans could end up in losses if they are forced to borrow from banks and credit institutions to raise funds.  

“If leasing firms face internal funding problems, they would need to take advantage of banking loans with 24 percent interest, a process that could decrease their motivation to enter the real estate market,” Hamidreza Ebdali, board director of the leasing firms union.

He called on the ministry of roads and urban development to help leasing firms make use of the government subsidized loans or let them act as intermediaries to sell homes and take their commission.  

 

Financialtribune.com