Economy, Business And Markets

Plans to Develop Mortgage Market

Plans to Develop  Mortgage Market Plans to Develop  Mortgage Market

The Ministry of Roads and Urban Development is geared up to revive the mortgage market, an advisor to the Ministry of Roads and Urban Development said Sunday.

Speaking to the press on the sidelines of a Seminar on Housing Development Policies in Tehran, Hussein Abdo Tabrizi stressed that the government does not support speculative activities in the housing market and is looking for effective and lasting ways to stimulate the crucial sector.

He ruled out the possibility of a hike in housing prices, as anticipated by some groups, as a tool to revive the stagnant housing market.

“Plans are underway to develop the mortgage market parallel to reducing the inflation rate”, he said, referring to plans to end recession in the housing sector

Meanwhile, the Ministry of Roads and Urban Development intends to allocate luxury residential and commercial buildings, which were built during the previous administration, to the public service sector for administration and hoteliering.

Abdo Tabrizi regretted that oil revenues to the tune of $120 billion in 2011 were wasted on unnecessary reconstruction of buildings that were not dilapidated.  He argued that the resources could instead be used to develop new housing units, curb inflation and consequently reduce  mortgage rates.

The irresponsible decisions plus profligacy of the past “squandered over $27 billion of bank resources in the past decade,’’ Abdo Tabrizi said.  

The only solution to contain the three-year recession in the housing sector, he said, is to provide mortgage with reasonable interest rates. “The current interest rates of 25%-30% have made it almost impossible for the common man to buy a home.”

The senior advisor recalled that in other countries mortgage accounts for 80% of the price of the property while in Iran the amounts are paltry and “cannot be regarded as mortgage.” He called on the Money and Credit Council – the highest monetary policymaker – to reduce the interest rates on loans so that people can afford to buy homes.

On the status of the housing market in the next five-year economic development plan (2016-21), the housing expert said, “The plan is not much different from the Comprehensive Housing Plan. The only point where it can differ is the anticipated change in the mandate of Bank Maskan (housing bank) in that it could emerge as a development bank.

In trying to lift the stagnant housing industry, the MCC has agreed to increase the ceiling of housing loans to 800 million rials ($27,000) in Tehran, and 500 and 400 million rials respectively in other big cities and towns. The plan, though still not effective, has failed to move the recession-hit real estate market.