Economy, Business And Markets

Private Sector Can Energize Housing Market

Private Sector Can Energize Housing Market Private Sector Can Energize Housing Market

Reinforcing the private sector will lead to improvement and growth in the long-stagnant housing sector, according to Muhammad Mehdi Mafi, an analyst. He added that government’s interventionist policies had adverse effects one of the key growth sectors in the past and urged the Rouhani administration to avoid past mistakes.

He was apparently referring to the controversial Mehr Housing Project, a public housing scheme initiated by former president Mahmoud Ahmadinejad administration that imposed a huge burden on the national budget stoking inflation and deficit spending along the way.    

“The government is not able to resolve the current housing bust due to the sharp plunge in oil prices and deepening budget deficits,” ISNA quoted the market analyst as saying.

 Revitalizing the private sector would be in the interest of the government, he added, and urged the officials to promote efficiency and transparency to the market while putting an end to rent-seeking and corruption.    

“Clearing the way for the private sector to assume the leading role in the housing sector is government responsibility. This would be achieved when the relevant regulating bodies let private enterprises manage the property market.”

Mafi also considered the closure of the PMD file (possible military dimension of Iran’s nuclear program) by the International Atomic Energy Agency (IAEA) and the prospective lifting of sanctions as developments that can and should revive the housing sector and open it to foreign investment.

The housing market has slipped into one its worst recessions in recent memory after the real estate bubble burst in 2012. Sporadic efforts by the government in the last two years have so far proved futile to lift the market form the deep slumber.

The housing sector’s links to macroeconomic indices is rather complicated in Iran and the prediction of real estate trends at times impossible. “Volatility in other markets usually compels investors to move to more stable investment such as real estate. However, this time they were in for some disappointment simply because the housing market itself became volatile.”

 Opposite View

While many reasons have been cited for the housing bust, some experts blame the prolonged recession on the lack of government initiative.

Mojtaba Bigdeli, head of the Iranian Association of Builders - an official platform for developers – went so far as to say that the present recession was “unprecedented in the past century” and blamed the government for its “lack of commitment” to address the issue, Fars News Agency reported.

“The absence of concrete plans has prolonged the crisis in an industry that can serve as an engine of growth.”

He considered high interest rates as an obstacle to growth in the housing industry, and said “This would also hurt commercial banks” whose assets have been locked in the stagnant industry.

The builder urged the government to end its “contractionary policies” that seek to curb inflation and instead focus its time and energy on ending the painful recession.