The dog days of summer are coming to an end but there is no tangible upswing in the dormant real estate market. The recession-plagued industry has been awaiting relief after the price bubble burst more than two years ago. Officials at the Ministry of Roads and Urban Development believe much remains to be done to get this sector back on its feet.
The government has tested the waters with palliative measures to stimulate the key industry, albeit with little success. From raising the mortgage ceiling in May to following in the footsteps of the former administration to stick to affordable housing projects, the Rouhani administration has so far failed to deliver the housing sector from its recurrent woes.
Deputy minister of roads and urban development, Hamed Mazaherian on Tuesday blamed the housing recession on macroeconomic factors and confirmed experts’ views that addressing the problem demands a holistic approach as opposed to stopgap measures tried and tested in the past.
“The housing market has never performed independent of other sectors of the economy and a boost in investment and macroeconomic factors would certainly benefit the anemic real estate market,” he said.
Nevertheless, the official defended the 600-million-rial ($20,000 at the official exchange rate) mortgages included in the housing stimulus package, saying the loans, thought measly, would benefit the housing sector by supporting construction. He, however, cautioned that such measures would take time to come into effect.
The Money and Credit Council, the highest policymaking body of the Central Bank of Iran, agreed in May to almost double the loan ceiling for first-time buyers in Tehran to 800 million rials ($24,000) and in smaller towns to 600 million rials.
Another decision made by the council was de-monopolization of the mortgage market. Since 2008, Bank Maskan had been the only commercial bank authorized to give housing loans. Now 21 other lenders are free to join the club.
But most lenders have shown little if any interest in offering home loans which is not a surprise because the combination of nuclear-related sanctions and economic downturn has undermined banks’ loan quality.
“The main reason for most lenders not to lend is because of their liquidity woes -- a problem we had foreseen, but now that we have removed this barrier we should wait for banks to raise their capital to be able to offer housing loans,” Mazaherian noted.
He said the mortgage scheme worked based on a “saving plan” which seeks to attract people’s savings for home buying -- a common practice in most countries. The initiative is more pressing now that most people have given up on the dream of home ownership, the official added.
Killing the Beast
It is high time that the government took the bull by its horn to tackle the housing problem head-on. The housing market’s ripple effect on other sectors of the economy is far-reaching to be hurled on the fringes.
A housing expert has gone so far as to name the next Iranian year (starting March 21, 2016) as the “housing year.” Abbas Zeinali, told ISNA “the last, best hope” for economic recovery lies in government taking effective action to resuscitate the real estate market.
He echoed the words of another analyst Hessam Oqbaei who had earlier exhorted government officials to revive an industry that fuels 300 industries and affects approximately 1,200 professions.
The famous saying “it’s the economy stupid” is relevant here. A revived housing market is expected to give a new lease on life to the limping construction industry which is akin to a smorgasbord of domestic industries.
Needless to say, the dilemma is how to revive a sluggish housing sector which is in the throes of an ailing economy. The government has to rise to the occasion and leverage policymaking to strike a path to recovery.
