Ministry Pushing for Housing Leasing

The Ministry of Roads and Urban Development is planning to tweak regulations to activate leasing companies in the housing sector in order to undertake market recovery, a high-ranking official at the ministry has announced.

“We are negotiating with the monetary policymaker [Central Bank of Iran] and top officials of the banking system to reform and redefine regulations concerning the operations of leasing companies in the housing sector,” Ali Chegini, managing director of the ministry’s Planning and Economy Office, told HIBNA, the news portal of Bank Maskan–the agent bank of the housing sector.

As the official notes, in spite of the central bank agreeing to the operations of rent-to-own companies and issuing a related directive, a number of limitations have hindered these firms from entering the market.

“As the official leasing interest rates are unacceptably low for companies, the authorized leasing firms’ own constraints in terms of capital and resources and tax issues pose hurdles,” he said.

In February, after much discussion, CBI issued a directive officially allowing leasing companies to operate in the housing market with an interest rate cap of 21%, but they currently do not play a role in the market as a result of the aforementioned reasons.

According to Chegini, leasing companies in other nations have proven their positive economic impact and in view of the limited ways through which people can receive finance to buy homes in Iran, their operations would be most welcome.

“As a purchase option, in addition to increasing the current purchasing power of consumers, leasing would create a credible demand for housing builders so that they can balance the final cost and optimize their operations,” he added.

Chegini and other MRUD officials such as its deputy for housing, Hamed Mazaherian, have repeatedly announced that the ministry is counting on the operations of leasing firms in the housing sector. These firms “will have a significant role in extending the much-needed finance to homebuyers” in the future, Mazaherian had recently said.