Economy, Business And Markets

Surge Likely in Home Renovations

Surge Likely in Home Renovations Surge Likely in Home Renovations

A government scheme to finance the renovation of old urban areas has been finalized and Bank Maskan -- which specializes in housing loans—will start lending 50,000 applicants by the yearend  (March 20).

The scheme is set to provide each applicant in major cities with 500 million rial ($16,600) loans, while applicants in urban areas with more than 200,000 residents, and those with a population of less than 200,000 would receive 400 million rials ($13,280) and 300 million rials ($9,960) respectively, the Ministry of Roads and Urban Development news website reported.

Loans have a repayment period of 12 years with the government subsidizing 10% of the interest on loans. Hence the borrowers will have to pay 14% interest for the first two years and 11% for the rest of the period.

The government has allocated a total of two trillion rials ($66 million) for renovation of distressed urban areas as a part of its incentive package for stimulating the housing sector which is saddles with a long and painful recession.

Data from the ministry show that in Tehran alone more than one million people are living in 3,000 hectares of distressed urban areas.

 Wrong Precedence

While the government has set its sight to revamp old parts of cities, premature renovation of buildings in other parts has cost the country a total of $27 billion, according to Hussein Abdo Tabrizi, an advisor to the minister of roads and urban development.

“Countless homes built 20-30 years ago have been demolished while they were supposed to last 40-50 years,” the website quoted him as saying.

Abdo Tabrizi blamed the municipalities for providing investors and builders with flawed data saying, “Investments should have been directed toward refurbishing old urban areas rather than vacant lands.”

The official said construction frenzy has led to an unusual increase in the number of empty homes in the country the present value of which is estimated at $20 billion at the moment.

  High-Rise Buildings

Abdo Tabrizi also noted that the Central Bank of Iran has approved the allocation of one billion rial loans to builders for construction of high-rise buildings, saying that traditional financing methods were not applicable for building skyscrapers.

 “Modern financing methods make use of the capital market and the money market for building such buildings,” he said.

He added high-rise apartments are often rented, or sold through long-term leasing contracts.