Economy, Business And Markets

Minister Takes Stock of Housing Industry

Minister Takes Stock of Housing IndustryMinister Takes Stock of Housing Industry

The minister of roads and urban development elaborated on the status of the sluggish housing market, the ministry website reported.

“Up until now 12% of bank loans have been allocated to the housing sector,” Abbas Akhoundi said at a meeting with senior managers and journalists at Ettela’at Institute, the country’s oldest media organization,

In recent years, builders say, regulations on building permit issuance in large cities have given rise to a speculative market that has rendered construction activities unprofitable. The dysfunctional housing market has seen property prices go through the roof without any justification throughout the past three decades and has inhibited the flow of investment into related manufactures, the minister noted.

The average price of land and housing units in most parts of the country rose nine-fold and six-fold respectively during the two four-year tenures of the previous administration, according to the minister.

“The profit on land speculation is 1.5 times higher than home construction,” Akhoundi said.  

In the past two years, President Hassan Rouhani’s administration has made every effort to stop speculative activities by imposing restrictions on issuing construction permits, that resulted in relative stability in housing prices.  

As to the progress and problems related to the Mehr Housing Scheme, the minister said, “The government’s share in housing construction never surpassed 2% and the private sector had full control over the market prior to the launch of the Mehr project.” He regretted that the involvement of the government of former president Mahmoud Ahmadinejad in the controversial Mehr Housing Scheme was the first foray by the government in the housing sector on a massive scale.

Ahmadinejad’s administration launched the low-cost housing project in 2007, with the aim of providing homes to the low-income strata. The scheme, which envisaged building two million units over five years, eventually caused a sharp hike in liquidity and inflation, not to mention the shoddy construction/raw materials plus allegations of fraud and embezzlement.

Now the completion of the vast and expensive scheme has “become more difficult and complex as it involves mega cities such as Tehran and Mashhad, each with respectively 13 and 5 million population,” according to the minister.

Elaborating on the difficulties faced in the process, Akhoundi said “The Mehr Housing Scheme suffers from a lack of legal, financial and managerial structures where the responsibilities of those involved are not clearly defined and some of them have little to no knowledge of the construction sector.” The problems have made it more difficult to move the multi-billion-dollar project forward, he rued.

Improper locations designated for the implementation of the project has led to excessive construction sometimes by adding up to 30,000 new housing units in areas fit for only 500-1000 new ones. “Financial resources needed to establish the urban infrastructure and utilities for these areas, such as water, gas and other networks, and superstructures such as police stations, gardens and parks and transportation have further complicated the problem.”