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Poor Prospects for Home Installment Sale
Economy, Business And Markets

Poor Prospects for Home Installment Sale

Installment sale of new housing units is estimated to cost around 30-35 million rials ($996-$1,163 at the official exchange rate) per month for buyers, the head of Property Developers’ Association said.
Shedding light on the details of the proposal put forward recently by property developers, Farshid Pourhajat said “Bank Maskan (Housing Bank) has agreed to guarantee only up to 1 billion rials of the price of each new housing unit which is lower than the figure initially proposed by the association to help improve the purchasing power of home buyers, Mehr News Agency reported.
Elaborating on other features of the scheme, Pourhajat said “The loans will be granted by property developers and the repayment period is between three to seven years.”
He added that the interest on such loans is 2% higher than the inflation rate plus 4% for banking services which explains why the installments cannot be lower than 30 million rials.”
Justifying the rather high amount for the monthly installments envisaged in the scheme, he said “The loans offered by the private sector is different from those offered by Bank Maskan because the latter uses government resources in granting the cheap loans.”
The official recalled that households in Tehran usually pay around 10-20 million rials ($332-$664) per month in rentals and the new scheme enables them to own their own apartment when the installment payments are over.
Noting that property developers cannot afford to compromise further in reducing the monthly payments by home buyers, Pourhajat called on the government to support the developers now that they have agreed to help the struggling housing market.

 Different Agenda
A housing analyst, Ahmad Reza Sarhadi, criticized the installment sale scheme saying that “Property developers are largely trying to reverse the flow of money that went into the gold and forex markets” in the past few years due to the extended slack in the housing market.
He believes the plan does not target genuine homebuyers as the average monthly income of many households and fixed-wage earners is about 10-15 million rials ($332-$498) and so they cannot afford the 30 million monthly installments if they want to join the new housing scheme.
The government does not have enough resources to drive the market and the common masses simply do not have the type of money to apply for the housing loan schemes to be offered in the near future by the government he recalled.
 To end the long and difficult recession in the housing market, the analyst called on the government to “improve the overall economy which could eventually improve the purchasing power of households and stimulate demand in the housing market.”
He, however, did not offer solutions as to what the government should do to improve the sanctions-hit economy, especially in light of the unprecedented decline in the price of crude oil.
Last year, property developers submitted a proposal to the government declaring  they were ready to sell their new housing units under a variety of financing schemes, namely ‘retail installment’ and ‘retail credit’ sales to consumers wanting to purchase high-ticket items but are short on capital.

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