The lifting of sanctions will help create the atmosphere for improving the recession-ravaged housing construction market, Farshid Pourhajat, a member of the board of directors of the Builders’ Union said. Termination of the international restrictions should enable builders to improve quality along with the supply of affordable housing.
All nuclear-related sanctions on Iran ended last weekend as the nuclear accord between Iran and six global powers came into effect.
“One major problem of our economy is the credit crunch in the housing market which is behind the lingering recession in that sector,” ISNA quoted him as saying.
The economic sanctions had disconnected Iran’s financial markets from their international peers, increasing the cost of money and leading to the credit crunch that has affected almost all sectors of the economy.
Pourhajat said in the post sanctions period “cost of money will decrease and in turn help put an end to the money crunch plaguing the economy.” He added that lower cost of money will translate into a boom for industries and the housing sectors.
The real estate market has been in a deep recession for several years with the government’s schemes, including cheap loans for first-time homebuyers, unable to make a difference. On the flip side, builders have been unwilling and unable to cut prices and seem to be waiting for higher profits as and when the market picks up. The recession in the housing sector is all the more alarming given its role and influence in creating jobs and lubricating the wheels of large industries related to the construction sector.
The senior builder asked the Central Bank of Iran to pay closer attention to the needs of the housing sector as the post sanctions are relegated to history. “The CBI should create the provisions to use a part of the freed foreign assets to increase housing loans at rates lower than inflation.”
Pourhajat also called on the Parliament to include specific measures in next year’s budget to help stimulate demand in the housing market. “Incentives incorporated in the budget should be such that they encourage builders to reinvigorate their construction activities.”
The termination of sanctions is expected to increase investor interest to bet their money in the property market. It should also decrease the investment risk in all sectors of the economy.
Post-Sanctions Boom
Another senior builder also weighed in on the issue on Friday saying the housing construction industry will benefit from lifting of sanctions in tandem with other industries. However, he believes stronger supply does not necessarily translate into lower prices in the short run.
“Different sectors of the economy will benefit from sanctions relief as frozen assets are released and foreign investment flows in. The housing industry, in the meantime, will pick up,” Hassan Mohtasham, head of Tehran Builders’ Association told Fars News Agency.
He, however, dismissed the possibility of lower home prices in the short run because “that would be subject to lower finished cost of housing units,” which again is highly unlikely duet to the inflation and scrapping to energy and other subsidies.
He was of the opinion that economic revival should lead to better flow of cash and distribution of wealth. “This could eventually end the recession in the construction industry. The overall economy obviously stands to gain if recession ends in the housing industry.”
