Economy, Business And Markets

Mehr Housing Project Adds 120,000 New Units

Finance Desk
Mehr Housing Project Adds 120,000 New Units
Mehr Housing Project Adds 120,000 New Units

With the addition of 120,000 housing units later this month, Mehr Housing Scheme is poised to become a 1.5 million-strong housing project. Deputy Minister of Roads and Urban Planning Ahmad Asghar Mehrabadi announced during a trip to the southeastern province of Sistan-Baluchestan that an additional 240,000 units have also been built but yet to be connected to water and electricity.

“The government has worked to support the Mehr project by giving out property free of charge and also offering discount loans with rates as low as 4% in rural areas and 7% in major cities,” Mehrabadi was quoted as saying by IRNA.

The Mehr project is a large-scale construction program initiated in 2007 by the previous administration to provide two million low-income people with housing units through free land and cheap credits, but the nationwide scheme slowed down due to lack of funding. The project has also been blamed for contributing to inflation.

Mehrabadi said the government has also helped the project by covering half the cost of permit issuance and construction permits. He added that special care has been taken to improve facilities and infrastructure of the projects by spending 1.8 trillion rials ($620 million) on erecting mosques, schools and police stations in the vicinity of the homes. The funds, he said, have come through housing subsidies and the ministry’s revenues.

The official said although Mehr Housing Project is a mammoth and wide-ranging project, it has burdened the government with heavy expenses due to hasty measures taken for its completion.

“Despite all of this, Mehr is a serious agenda for the current administration because it is a public issue,” he emphasized. “That is why the government is working to address its problems and finish them throughout the country.”  

He continued: “Fortunately the government has done a good job in this area despite fund shortages by finishing 438,000 units, which account for 30% of the whole. The government also plans to finish 120,000 units more soon.”

The newly added units are slated to be unveiled during the Government Week that starts on Aug. 24.

 Bite of Recession

As government’s efforts to finish more housing units in the country picks up steam, the housing market still struggles to break out of a severe recession.

In fact, the real reason behind the housing sector’s stagnation is said to be an imbalance between supply and demand, which in turn goes back to home prices that are not affordable for most sectors.

The much-hyped increase in mortgages has also failed to deliver its promise and is even feared to send home prices higher which will be another blow to low-income households.

The head of the Association of Home Builders recently railed against the banks for refraining from offering mortgages. The lenders, he said, mention the high risk involved in long-term loans as a major deterrent.   

The vital role that the housing market plays in Iran’s economy demands swift action to address the crisis. The industry is said to comprise 20% of the gross domestic product and control 13% of the job market.

The immediacy leaves little room for waiting around for the economy to simply turn around and upend the market. A more substantial short-term response is required to address the root causes of the slowdown.

Alongside fighting rent-seeking behavior as a major nuisance in the housing market, the government has no better alternative than to support more home constructions.  

Mashallah Azimi, secretary-general of Iran Chamber of Cooperatives, recommends that instead of raising tariffs and construction permits, the government should incentivize businesses to build more homes. This initiative, Azimi says, will provide the government and municipalities with more sustainable income.

“The government should strengthen secondary markets like housing investment funds and use their revenues to make home construction loans,” Azimi said in an interview with ISNA.