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Housing Loans Not Inflationary

Housing Loans Not InflationaryHousing Loans Not Inflationary

The Ministry of Roads and Urban Development says its housing loans will not contribute to the rate of inflation.

Deputy minister, Hamed Mazaherian, on Saturday elaborated on the government’s policies to help stimulate the property market and said, “The carefully planned housing loans will not stoke inflation because the loans will be injected into the market incrementally.”

Mortgages accounted for 25% of the total lending during the last three decades, he recalled, while “currently this has been reduced to 10% of all loans,” therefore he noted that increasing home loans by 15% would not disrupt the market

However, no single move can revive the sluggish housing market “as long as the country’s macroeconomic indices remain disappointing,” he said in comments posted on the ministry’s website.

From the next fiscal year (starting March 21, 2016), every day 150-200 applicants will receive the 800 million rial loans.

Funds for the housing loans are not provided by the Central Bank of Iran because that would have inflationary effects. “Such loans would be paid through banks’ own resources including bank deposits and loan repayments, which are expected not to add to the inflation.”

He also dismissed the criticism in some circles of the loan schemes for new constructions and those who claim there are sufficient houses in the country and hence loans should focus on selling what is already built.

“I think households still need residential units and improving the supply side of the market would help them,” he said.

Mazaherian added that most of the loan schemes of his ministry seek to support the middle class that have some savings and are fixed- wage earners.

Bank Maskan’s Housing Savings Account, which provides homebuyers with 400-800 million rials ($13,350-$26,700) in small towns and big cities respectively, Jualah loans, subsidized loans for renovation of residential units, and issuing bonds are among government plans for stimulating the moribund housing sector.

The ministry has also launched the Social Housing Scheme to provide 25,000 low-income households every year with affordable housing.   

Financialtribune.com