Economy, Domestic Economy

CBI Weighs Higher Mortgage Ceiling

CBI Weighs Higher Mortgage Ceiling
CBI Weighs Higher Mortgage Ceiling

The proposal calling for an increase in mortgage ceilings for the Mehr housing units has finally landed in the Central Bank of Iran to be reviewed.  

Since last year, the ministry of roads and urban planning has been trying to increase the ceiling of individual house loans from about $9,000 to $11,000. After a series of correspondence between the ministry and the central bank, the proposal was agreed upon as the only solution to the semi-finished Mehr housing units, FNA reported on Wednesday.

Abbas Akhoundi, minister of road and urban planning, said in a letter to first vice president Es’haq Jahangiri that construction of 900,000 units in urban and rural areas has either slowed down or come to a halt due to lack of finances.

The Mehr Project was a controversial program formulated by the previous government to provide hundreds of thousands of low income households with cheap apartments.

In response to Akhoundi’s letter, Jahangiri asked CBI Governor Valiollah Seif to put the case in priority and take necessary measures to provide loans for the project.

Recent wage hikes for construction workers and also a rise in prices of construction materials have, among other reasons, delayed the program, which has so far swallowed large sums of money, pushing liquidity and inflation up to unprecedented levels.

According to FNA, no steps have been taken yet to compensate the loss of those individuals who have already made advance payments for the housing units.

Since last year, the Rouhani administration has tried to curb inflation and slow down the liquidity pace growth, while it’s been struggling for a solution to stop the Mehr project after delivering the completed units to their owners.

The Rouhani administration has described the Mehr project as one of the largest hurdles to Iran’s economic recovery. Last year, President Rouhani singled out the project as being the main culprit behind the rampant inflation, estimating it was responsible for 40% of current liquidity.

The project offered developers free government land to build affordable housing units for first-time owners. Since most citizens have difficulty getting small bank loans, homeowners who signed up for Mehr housing were given 99-year mortgages guaranteed by the state. Banks then acted as intermediaries between developers and the government. Before handing over the keys to the presidential palace last summer, Ahmadinejad announced that his administration created more than 1.18 million low-cost residences under the Mehr program.