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Reconstructing Housing Sector

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Reconstructing  Housing Sector Reconstructing  Housing Sector

The government should intervene indirectly in the housing market by introducing structural reforms to pull the embattled sector out of the long and drawn out recession, the minister of roads and urban development said Monday.

“However, a free housing market would create a hotbed for profiteers,” Abbas Akhoundi told the Conference on Housing Development Policies in Tehran.

The government’s rampant meddling in the real estate market -- like the launching of the controversial low-cost Mehr Housing Project by the former administration -- results in inferior housing constructions and “today the living conditions (buildings, schools, utilities etc) of a third of the population is undesirable.”   

He noted that taking a middle-ground approach to the key housing sector is a daunting task. “The ministry prefers indirect involvement in the sector through third institutions, rather than directly launching projects.”

“Institutions like development banks are the housing sector’s growth engines that help it grow “, he said.

 Sounding the Alarm

He warned that the economy is in bad shape and said, “Short-term, palliative measures not only fail to solve problems, but make a bad situation worse.”

Akhoundi urged state officials to be more candid in their public statements because a false sense of optimism would lead to hopelessness in the long-run.

“Some observers claim that the housing industry cannot help the country’s economy because supply has overtaken demand,” he said. “This is a false notion and the reality is that we are in fact short of residential units.”

Akhoundi added that his ministry would utilize the capital market, money market and its other resources in providing necessary tools for funding the housing industry.

“However, most of the ministry’s assets are not liquid, developing an ‘asset management plan’ to increase the value of underutilized and/or non-utilized assets would help us,” he added.

Developing systems to guarantee the quality of buildings, both for constructors and buyers, would also help improve the market, he emphasized.

“Providing people with a roof over their heads in the middle of nowhere, with no infrastructure services is like reducing human beings to commodities,” he complained referring to Mehr Housing Scheme, which “has exactly done this… I have never seen such a plan even in socialist states.”

However, he reiterated that his ministry would deliver on its promise to complete the controversial multi-billion-dollar housing scheme.

 Transparency

Quantitative analysis would not lead to a comprehensive understanding of the housing market because “housing is a multi-faceted issue,” according to the minister.

“Simply talking about housing plans and programs without including precise geographical, social and cultural aspects would lead to flawed decisions,” he said.

The largest portion of the urban population lives in ten cities which is indicative of inefficient distribution.

Elaborating on the state of the housing market in major cities like Tehran and Mashahd, Akhoundi said that such cities are saturated and do not have capacity for further expansion.

“Our plan for improving the housing sector will concentrate on medium-size cities and no more on Tehran,” Akhoundi said adding that increasing livability of cities takes precedence to their expansion.

 Bank Maskan’s Role

Mohammad Hashem Botshekan, CEO of Bank Maskan, discussed the importance of transforming his bank into a ‘housing development bank’ and said that Maskan intends to focus on new financing models with less reliance on state funds.

The country mostly needs resources for big projects and that collateralization methods need to be revised in the banking system, as projects could collateralize themselves, he told the conferees.

“Using an assortment of lending methods like government credit lines, capital investments, bonds, promoting asset value and using external resources in a single project, would ensure the success of projects.”

Botshekan said that Bank Maskan, the main housing bank in Iran, along with its affiliated companies would offer financial solutions both for the public and companies based on their specific needs.

Financialtribune.com