The head of Tehran Builders’ Association says new schemes by the Central Bank of Iran and the Ministry of Roads and Urban Development will channel more money into production sectors that in turn will increase liquidity in the beleaguered housing sector.
Hassan Mohtasham said the recession in the housing sector is due largely to the macroeconomic conditions. “This [recession] is in fact a result of the slowdown that has currently hit other markets and eventually spills over into the housing market.”
In a talk with eghtesadnews.com, Mohtasham noted that predicting the future of the property market is subject to the policies of the government plus the outcome of the landmark nuclear deal signed between Iran and world powers.
One of the existing schemes to lift the housing sector from the present morass is in the mortgage-backed securities (MBS) which are designed to stimulate the debt market and spur the sluggish construction industry.
According to sources in Bank Maskan (Iran’s main housing bank and mortgage provider), 100 trillion rials ($3.25 billion) worth of MBS will be issued by the end of the fiscal year (March 2017) that is in line with government plans to issue 400 trillion rials ($13 billion) worth of Islamic securities. Maskan Investment Bank – the investment arm of Bank Maskan – offered the first tranche of MBS this month, collectively worth 3 trillion rials ($97 million).
For now one of the biggest economic hurdles in Iran is “the stagnation in the markets” and the systemic decline in investments, he said. “But if foreign investors would be more willing to cooperate with Iran and their role bears fruit, a significant part of our financing problems will be resolved that would consequently improve the housing sector.”
Increasing Money Supply
The Ministry of Roads and Urban Development in tandem with the Central Bank of Iran have plans that should increase the money supply in and among production sectors and ease the flow of liquidity in the market, the homebuilder said.
The special Housing Savings Account, launched in June 2015, is one of the other schemes to move the stubborn property market out of the extended doldrums. It aims to provide first-time homebuyers with loans at 14% and requires applicants to make an initial deposit and wait for a year before they are eligible for the mortgage.
Adding that generally the country is doing better than it did a few years ago, Mohtasham believes as a result of international business delegations coming to Iran for negotiations –which at times leads to signing deals in the roads and housing sectors – it can be said that a better future lies ahead.
“Although to create a better economic climate, our efforts should not be focused on steering investments in the housing industry alone because it could create price bubbles,” he warned. If the current trend is controlled and sustained so that prices rise as a result of market mechanisms and not “pumping of capital”, conditions will be satisfactory, he opined.
When demand and supply rule, “house prices will increase in line with, or at a slightly higher level than, the inflation rate, which would be completely natural.”
