Economy, Business And Markets

Long-Term Loans Can Lift Property Market

Long-Term Loans Can Lift Property MarketLong-Term Loans Can Lift Property Market

Lenders should offer housing loans with long-term repayment periods in order to lift the sluggish housing market, Hussein Abdo Tabrizi, an advisor to the minister of roads and urban development said. He pointed to the shrinking purchasing power of Iranian households and said banks should revise housing loans’ repayment terms in light of dwindling personal incomes.

The economic clout of Iranian households has been of the descending order ever since 2007 and their living standards have seen a systemic decline, he noted.  These ground realities lie at the root of lackluster demand and the extended slumber in the key property market.

 “The government is aware that the problem of the stagnant housing market lies in weak demand. But it has resorted to only short-term solutions thus far” that have not produced the desired results, he was quoted as saying by IRNA.

Abdo classified housing units as “sustainable goods” saying that the key sector needs long-term plans and policies to be able to get back on its feet. “Selling houses on installment basis is a good way to stimulate demand. However, the repayment period should be long enough and installments reasonable.”

The ministry is determined to help improve purchasing power in the real estate market, he added, pointing to the ministry’s new schemes to help homebuyers and stimulate the market that stubbornly refuses to budge because experts believe “the money is simply not there.”

“The housing savings account for first-time homebuyers was one of the schemes aimed at helping middle-class homebuyers.” However, he stated that banks are unwilling and unable to offer long-term mortgage due to galloping inflation and fading lending power.

The loan ceiling for homebuyers in Tehran is 800 million rials ($26,544). For applicants in towns with a population of over 200,000, it is 600 million rials ($ 19,908) and for smaller towns 400 million rials ($ 13,272).

Expanding the mortgage market can help lift demand for the newly-built houses according to the senior advisor. “We are hopeful that the declining inflation rate could result in a stronger mortgage market.”