Economy, Business And Markets

Proposals to Energize Property Market

Proposals to Energize Property MarketProposals to Energize Property Market

A government-affiliated think tank has urged the government to allocate more resources to revitalize the beleaguered housing market.  

The Office for Housing Economy and Planning has warned that despite a paltry growth during the previous year, (ended March 20, 2015), the property market remains mired in recession, ISNA reported on Sunday.

The agency, an affiliate of the Ministry of Roads and Urban Development, is seen as influential in housing policies set by the ministry.

Referring to the sufficient supply of housing units in the period between 2011-12, the report recommends stimulating demand by empowering buyers through measures like the establishment of real state leasing firms and raising the ceiling on housing loans – a paltry amount by the standards of most developing and highly populated countries.

The government announced a comprehensive incentive package in October to pull the economy out of a long-running recession with the real estate market largely absent.

In response to growing concern over the stagnant housing market, the government has raised the ceiling for several mortgage schemes but the market has responded in a lukewarm manner simply because they barely cover 15% of home prices in big cities like Tehran.  

“Banks are recommended to issue certificates of deposit in order to finance the construction sector and using tools in capital market, like creating land and construction funds as well as issuing securities, would also be helpful,” the report suggests.

The body calls for allocating more resources to the housing sector noting that since most of the raw material for housing projects are domestically-manufactured, a housing boom would carry with it many other industries now saddled with big inventories and declining fortunes.

 Innovative Measures

The office presaged a shortage on the supply side beginning in 2017 due to the lengthy construction periods caused for a variety of reasons.    

Incentives for builders would help improve home building according to the think tank, by offering tax breaks and low-priced land for residential units.

“Due to the recession and lack of demand many newly-built homes are vacant and these should be sold first,” it said.

The authors also recommended the establishment of an organization that acts as a coordinator among Urban Development and Revitalization Organization, Tehran Municipality and the banks. It could help facilitate the process of urban regeneration by enhancing three-way relations.

The report also favors the introduction of a successful housing pre-sales system used in other countries and says it can lift both the supply and demand sides.