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Proposal to Change Bank Maskan’s Mission

Proposal to Change Bank Maskan’s MissionProposal to Change Bank Maskan’s Mission

Gholamreza Salami, a senior advisor to the minister of roads and urban development, has addressed the issue of converting Bank Maskan (Housing Bank) into a development bank, a move that can help overcome the problems crippling the housing market.

Pointing to the government’s high potential to launch a development bank, Salami said the new entity would have a lot in common with the Islamic banking system. “It aims to both finance and supervise enterprises aiming to minimize risk of national assets loss,” Eghtesad News website quoted him as saying.

While commercial banks used to support the demand side of the housing market through providing mortgage loans, the development bank would focus on the supply side, he said.

“Iran has never had a development bank in the field of construction.”

Bank Maskan has so far been able to only provide limited number of loans to home builders that were not enough at all.

As the development bank intends to largely fund mass builders, Salami believes supply of medium- and low-cost houses would receive an impetus due to decrease in costs, providing middle class families with affordable homes that meet required standards.

The official said the development bank would take advantage of experts who can assess long-term profitability of the business plans submitted to the bank. If approved, the plan would be funded and the construction process would be closely supervised by the bank to cut the risk of money loss to a large extent.

“Supervision is a key factor in development bank that makes it different from commercial banks,” he underlined. Bank of Industry and Mine is the only bank that simultaneously funds and supervises projects in the field of industry, he said, hoping that the development bank would satisfy these goals in the housing market as well.

Salami said granting massive long-term loans may raise the risk of bankruptcy for commercial banks in the long run as the lenders, already in financial trouble, cannot risk locking up their money in long-term debt, while they only can offer short-term deposits.

“In contrast, development banks can finance large-scale projects as they are supported by the state,” he added.

Financialtribune.com