Economy, Business And Markets

Maskan Lends More Despite Ambivalence

Maskan Lends More Despite AmbivalenceMaskan Lends More Despite Ambivalence

Bank Maskan, the special housing lender, paid a total 95.4 trillion rials ($3.15 billion) in loans during the eleven months ending February 19, indicating a year-on-year growth of 21%, said Mohammad Hassan Moradi, head of the bank’s planning department.

“During the said period 93,476 homebuyers received 28.5 trillion rials ($941.3 million) from the banks,” Bank Maskan’s website quoted him as saying on Sunday.

The official noted that the growth in bank’s lending is mainly the result of raising the construction loan ceiling last year. “Construction loans amounted to 34.4 billion rials ($1.13 billion) in this period, which was used for building 100,000 housing units.”

 Construction loans’ cap was lifted to 1 billion rials ($33,100) last year.

The Money and Credit Council recently agreed to double the ceiling of Bank Maskan’s Housing Savings Account mortgage for newlyweds. According to a new directive, home loans for the new couples will be raised to 1.6 billion rials ($52,900) from the previous 800 million rials in Tehran.

In urban areas other than Tehran, young couples will receive 1.2 billion rials ($39,700), up from 600 million rials in the past. Those in towns with a population of less than 200,000 will qualify for 800 million rials ($26,400), twice the earlier 400 million rials.

The CBI-affiliated policymaking council had also agreed in May to double the borrowing limit for first-time buyers in Tehran to 800 million rials.

  Overall Decline

The changes to loan policy comes amid reports by the Persian-language  newspaper Donya-e-Eqtesad that the housing sector’s share of bank loans sank to 15-year lows in the end of the last fiscal year that ended on March 19.  

During the first 11 months of the previous year, only 10.4% of the loans went to the housing sector down 50% compared to a decade ago.

From 2001 to 2007 house prices and construction costs reached their peak due to a fair and equal distribution of loans to different sectors, which was made possible due largely to the equitable increase in both the mortgage ceiling and the rate of inflation.

However, in 2007 the trend began to reverse and saw a steady decline in ensuing years. According to CBI data, last year barely 10% of banking loans were allocated to the housing sector.  A fall that is understandable given the painful and extended recession with which the key sector has been grappling.

  Decisive Factors

A general shortage of mortgages –due to banks’ struggle with NPLs and draught of resources -- along with the severe recession in the real estate market, are regarded as the main culprits behind the calamity visiting the property market.

Major lenders’ investment in constructing luxurious homes and commercial centers that are facing lackluster demand also deprived the banking system from providing new long-term loans, including housing loans, especially last year.

The last but not the least factor that devoured the housing sector of its share of loans has been the allocation of the CBI’s financial resources to the Mehr Housing Scheme; almost over 400 trillion rial ($13.2 billion) was invested in the controversial scheme in 2009-13 which temporarily increased the amount of loans for housing during these years. But as the costly project came to an end, the allocation of the CBI resources to the housing sector, a major and costly error of judgment by the former government,    came to an end.

Concerning recent mortgages offered by Maskan, it is projected that the share of the housing sector from the banking resources in the current fiscal year will pick up.

Bank Maskan—as the main housing bank—has provided over 40% of housing facilities over the past few years with the rest coming from other lenders. Therefore, doubling the ceiling of Bank Maskan’s Housing Saving Account mortgage, as an influential player, indicates improvement in housing loans and thus a move forward.