Bank Maskan to Fund 1.3m Homes by 2021

Bank Maskan–as the agent lender of the housing industry–plans to fund the construction of 1.3 million houses in the next four years.

Announcing the above, Bank Maskan CEO Mohammad Hashem Botshekan said the funding will come through a variety of instruments, including home loans, special funds and bond issuance.  

The Ministry of Roads and Urban Development has, through Bank Maskan, tapped mortgage-backed securities and real-estate funds in the past couple of years, as it sought new means of financing to salvage the beleaguered housing sector.

“The rate of mortgage loans to all loans allocated by commercial banks stood at 12.2% in 2013, whereby it followed a declining trajectory in the years  to reach 9% last year and 7.4% in the first five months of the current year,” Botshekan told the 17th Conference on Housing Development Policies held in Tehran on October 10-11.

“This indicates that the banking system is not moving in the same direction as the housing sector,” he added.

But while the Bank Maskan chief was less than satisfied with the fact that his bank continuously has to shoulder the cumbersome weight of financing the sector that is lately showing signs of emerging out of a five-year quagmire, he was mindful of the fact that other bank managers are not enthusiastic about 12-year repayment periods on mortgage loans.

The Central Bank of Iran expanded the mandates of commercial lenders to dole out mortgage facilities about two years ago, but they have largely refrained from doing so.

Botshekan sought to outline the positive measures taken by Bank Maskan, the most prominent of which has been the successful Housing Savings Account which, according to him, has led to an eightfold increase in the purchasing power of people, as 282,000 applicants have so far made deposits.

The scheme requires first-time homebuyers to put down a deposit and wait for a year to become eligible for long-term low-interest loan that currently provides 50% of an average 75-meter residential unit’s value, a share Botshekan aims to increase.

While Bank Maskan has also established land and building funds, it has engaged in structural reforms such as improving its balance sheets and devising a four-year plan.

According to Botshekan, President Hassan Rouhani has clarified the bank’s priorities, namely overhauling investment in distressed areas, focusing on first-time homebuyers and young couples, achieving higher investments in rural housing and developing sustained instruments to finance the housing sector.

As to the schemes that are yet to be launched, Bank Maskan’s chief executive referred to capital buffer programs by the economy and roads ministries, a longstanding plan to turn the bank into a development bank and publish mortgage-backed securities and foreign exchange bonds.

In a nod to World Habitat Day and in light of the fact that housing costs constitute 35% of Iranian households’ expenses, Botshekan emphasized the importance of focusing on affordable housing in its policymaking, saying the people can bank on services provided by the lender at single-digit interest rates and decade-long repayment periods.

 Neighborhood Makeover

Local governments i.e. municipalities and the national government, through the Ministry of Roads and Urban Development and the Interior Ministry, will enter 270 neighborhoods a year to renovate them and improve their quality of life to meet the national standards, the caretaker of  the Urban Development and Revitalization Organization announced.

“While renovating each neighborhood will take about 10 to 12 years, the host of entities will work to revitalize 2,700 neighborhoods by the end of the Seventh Five-Year Development Plan [2023-28],” Houshang Ashayeri also said on the second and last day of the conference on Wednesday.

According to the official, half this volume will undergo renovation by the end of the current development plan (2022) and “according to estimates, renovating these worn-out neighborhoods will cost more than 1 quadrillion rials ($24.9 billion)”.

But as noted by Ashayeri, the failed experience of Mehr Housing Project, which saw the former administration finance major building efforts, has prompted officials to provide incentives for owners in distressed areas and mass builders to join hands to gradually rebuild the neighborhoods.

Hossein Abdoh-Tabrizi, adviser to Roads Minister Abbas Akhoundi, also spoke at the event, saying the 193-fold increase in land prices from 1991 to 2014 has created an unprecedented bubble in property assets.

This is especially detrimental for national interests, as “sometimes we need to allocate 80% of a rail project’s costs to buy lands to implement it”.