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One should own a luxury property in the upscale neighborhoods of the capital in order to enjoy the boost in the high-end property market.
One should own a luxury property in the upscale neighborhoods of the capital in order to enjoy the boost in the high-end property market.

Tehran’s High-End Property Market Improving as Foreigners Rent More

For one particular group of realtors thing have not been so bleak -- those specialized in renting property to high-end foreign customers on the northern flank of the capital, Tehran

Tehran’s High-End Property Market Improving as Foreigners Rent More

A little less than a year has passed since the lifting of the nuclear-related sanctions on Iran. Many were expecting an immediate lift in markets with the removal of the economic sanctions, including the key housing sector. But a variety of factors,  namely high inflation, high bank interest rates, low growth, instability in markets, and the government’s determination to reduce and reverse speculative activities in the housing market, have delayed better times.

But for the housing industry things have been much worse. The prolonged stagnation is still weighing on Iranian homebuyers and investors and last, but not least, the realtors. However, for one particular group of realtors thing have not been so bleak -- those specialized in renting property to high-end foreign customers on the northern flank of the capital, Tehran.

The fact of the matter is that leasing property to foreigners seems to have had one of the most felt recoveries in the wake of sanctions’ removal, benefiting both the estate agents and landlords. Attractive one-year contracts where landlords receive their full rent in advance have become more popular.

However, one should own a luxury property in the upscale neighborhoods of the capital, in order to enjoy such privilege.

A limited number of realtors, having a professional team of agents and lawyers, take care of the whole process. As per law, realtors are allowed to charge each party with about 3%-4% of the rent, though they usually ask for (and usually get) much more.

Owning property by foreigners is subject to permission from the Foreign Ministry for legal foreign residents. But foreign individuals and entities can rent property without any special permit.  

“The market has improved significantly in recent months,” says Linda, an expert in Delta real estate agency in Tehran that has a special department for renting property to foreigners.  

“Many foreigners approach us for rent [offices and homes],” she told the Financial Tribune. “Most of the inquiries result in signing rental deals.”

Prices have also been surging in recent months, she said.

Offices with 100 m2 in area, located in Mirdamad Street and Jordan (Africa) Street come at least for $2,600 per month.

A 185-square-meter office in Jordan Street costs $3,500 a month.  Another office in the same street built 25 years ago and a total area of 500 m2 can be leased for $10,000 per month.

Similar properties were offered at the most for $1,600 a month last year before sanctions were eased and foreign residents in Tehran were few and far between.

The prices are lower in other neighborhoods. Offices in the northwestern neighborhood of Saadat Abad can be had for $1,900 a  month. The same commercial space was offered at about $1,200 last year.

A 200-square-metere residential unit in the capital’s posh Kamranieh district is offered to foreigners at a monthly rent of $4,500.

A 245-square-meter home in Zafaranieh, another luxurious neighborhood in the north built in 2007 is offered at a monthly rate of $6,500.

‘Landlord and Tenant Law’ does not have rule for rents, allowing parties to negotiate the price themselves.  

A foreigner can pay the same amount ($6,500) for renting a 320-square-meter brand-new flat in Farmanieh, another luxurious neighborhood in the overcrowded metropolis home to 10 million people.

Smaller residential units in other posh areas like Jordan, Velenjak and Shahrak-e-Gharb come at lower prices – ranging from $2,000 to $3,500 a month. The year of construction has the most impact on rents of the structures.

 Trump Effect

Although enjoying the impact of sanctions’ removal, the market is now facing a new challenge. The US election result and Donald Trump’s shock victory has influenced the demand side of the market, as it has raised uncertainty among foreigners wanting to do business in and with Iran.

Linda says that the majority of foreigners have halted renting plans, after Trump swept to victory in last week’s bitterly-contested elections that stunned most observers from Afghanistan to Morocco.

Most of Iran’s key market experienced shock on Trump’s victory. But as in the global markets, conditions went back to normal soon after.

Trump’s victory could well have a longer impact in Tehran’s property-for-foreigners market and influence foreigners’ long and mid-term plans for reentering Iran and its market of 80 million people.

 

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