Upbeat Outlook for Housing Bonds

Bank Maskan, the agent bank of the housing sector, is upbeat about emerging out of its years-long stagnancy, as 14.2 million housing bonds have been traded by the end of the 10th month of the current fiscal year on Jan. 20.

The Iranian housing sector, mired in a five-year recession, is showing signs of recovery in the form of increasing housing deals, but many remain skeptical about its comeback.

In its latest report on the sale of housing bonds, Bank Maskan's news portal said the notable rise in the sale of bonds is an "undeniable" testament to the recovery of the beleaguered sector, especially since the hike has been unprecedented in the past six years.

Bank Maskan's report states that homebuyers are showing renewed enthusiasm in the third and fourth quarters of the year that usually entail less momentum, as the sale of 14.2 million bonds registers a 40% rise compared with the same period of last year.

Because the ceiling of loans allocated through the sale of bonds in the over-the-counter Fara Bourse used to be low in the fiscal 2011-14, the number of housing bonds traded in the capital market fell below 10 million.

Even when it was approved that special loans would be extended to couples through the bonds in the fiscal 2014-15, the trading of housing bonds was considerably lower than what it is now, reaching just above 11 million in 10 months.

In the fiscal 2015-17, even as the ceiling for the special loans for couples was raised, the number of sold bonds failed to exceed 10 million in the same period.

According to the lender, "in addition to confirming the housing sector boom, this is an important sign of the high effectiveness ratio of loans, which do not require down payments for strengthening the purchasing power of applicants in the housing sector".

Housing bonds are different from the other major initiative of the bank, Housing Savings Account, such that the latter requires applicants to make down payments and wait for a year to become eligible, while the former asks for no such thing but offers lower volumes of loans.

As Bank Maskan points out in its report, a large group of people attracted to housing bonds are those looking to buy homes older than 15 years. Even though they may have the down payment required by the Housing Savings Account, they choose the bonds because the older residential units are relatively cheap and remain immune to price fluctuations.

The third group tapping into the housing bonds consists of people who have already accepted state-owned solutions such as Bank Maskan facilities and loans allocated by cooperatives, and therefore have no choice but to turn to the bonds option.