Economy, Business And Markets

Optimism Over Housing Sector

Optimism Over Housing SectorOptimism Over Housing Sector

The Ministry of Roads and Urban Development will transform Bank Maskan, the country’s main housing bank, into a development bank and raise the lender’s capital by 50 trillion rials ($1.65 billion) in the next fiscal year(starts March 20) , Hamed Mazaherian, the deputy minister said on Friday.

The planned increase in Maskan’s capital would boost its lending power by 13 times, he said. “The increase will direct the flow of liquidity into the housing industry. As a result we will see improved funding for housing projects, improvement in macroeconomic indices and eventually exit from the housing recession,” he was quoted as saying by Mehr News Agency.

On the issue of raising the ceiling for housing loans, Mazaherian said that his ministry and the Central Bank of Iran maintain that home loans should cover at least 50% of the total cost of a housing unit. “We know an increase in housing loans is necessary. However, the prerequisite for any increase in housing loans is improving the lending power of banks.”

The senior official pointed to the surge in housing deals in the past two months saying that it could serve as a sign for a hypothetical boom in the key sector in the second half of the fiscal year (starting September 22). “Another factor that could signal better times is a possible increase in the number of construction permits.”

Central Bank of Iran’s latest data shows that rentals in Tehran during the eleventh month of the fiscal year (January 21-February 19) increased by 10.1% in comparison with the previous month and 11.3% compared with the same period last year.. This could also be a sign that the housing market is finally getting ready to get out of the recession in the next calendar year.

Mazaherian predicted the upcoming boom will be accompanied by an increase in home prices. However, he dismissed the possibility of any significant hike in housing prices saying “the increase will be reasonable and in tandem with inflation.”

The housing sector has been suffering from a deep recession for some years now. Government schemes such as establishing the Housing Savings Account to provide cheap mortgages to first-time homebuyers has not met expectations so far. A scheme by builders to sell houses on installments has also met with lackluster demand.

Mazaherian pointed to the government’s Comprehensive Housing Plan stating that “expanding the mortgage market” is his ministry’s foremost venue for helping lift the property market out of recession.

All the proposed schemes for the housing sector in the Comprehensive  Housing plan fall into eight main categories namely, housing for low-income households, renovation and rehabilitation of dilapidated buildings and informal urban settlements, reforms in urban and regional planning, improving construction efficiency, expanding the financing system, rural housing, development of rental markets and urban housing.