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New Housing Blueprint
Economy, Domestic Economy

New Housing Blueprint

In its latest meeting, the cabinet ratified its 7-section plan aimed at stimulating growth in the housing sector, renovating dilapidated urban structures, and providing newly-wed young couples with low-interest loans, MNA reported on Saturday.

The new approval is set in accordance with a proposal from the ministry of roads and urban development, and is based on the Article 127 of the Fifth Five-Year Economic Development Plan. It also refers to the Article 138 of the Constitution aimed at managing and supporting the supply and demand chain in the housing sector, passed by the parliament in 2008, and a 2010 legislation for supporting and renovating dilapidated urban structures.

The new approval puts the ceiling rate of mortgage loans in metropolitan areas at 500 million rials ($18,740), 400 million rials ($15,000) in provincial capitals and cities of more than 20,000 population, and 200 million rials ($7500) in other cities.

Also, the ceiling rate of mortgage loans is 150 million rials ($5,620) for temporary stay in dilapidated structures and informal settlements in metropolitan cities, provincial capitals, and cities with more than 20,000 inhabitants. In other cities the rate will reach 100 million rials ($3,750). All applicants are expected to pay 10 percent of the loans' interest rate and about 60,000 loans will be provided annually till the end of the Sixth Five-Year Development Plan (2016-2021).

The deputy road minister for planning and supervision is in charge of allocating finances for part of housing loan interests from the subsidy reform plan.

The Central Bank of Iran (CBI), the ministry of cooperatives, labor, and social welfare and several other related executive organizations will cooperate with the ministry of roads and urban development as well.

>>>New Loan Scheme
A new scheme that includes granting 500-million-rial housing loans is set to start within a month, the deputy minister of roads and urban development, Mohammad Izadi said in a news conference on Saturday.

The coordination committee for implementation of the guidelines of resistance economy, chaired by President Rouhani last Friday, examined housing sector's situation in search for solutions to stimulate growth in the industry. According to IRNA, the government is determined to introduce supportive housing scheme with specific regard to meet the newlywed couples' need for housing units.

Additionally, a rural housing project will be operational after financing is assured. The committee also studied the requirements for improving the investment and business environment as well as the government's policies for supporting the housing sector. In the meeting, President Rouhani underscored the urgent need for renovation of dilapidated urban structures and called on the ministry of roads and urban development to cooperate with the private sector in a bid to provide citizens with standard housing units.

>>>> Special Attention

For some time now a hot debate has been underway in Iran about the effectiveness of proposals by the government to help pull out the key housing sector from a stubborn recession.
The Rouhani administration has come up with ideas to revive the housing industry. First it proposed the "social" housing scheme to replace the highly controversial Mehr Project – a pet project of the former government. Both projects were initiated to help millions of low-income households buy apartments in the suburban areas of big cities.
Now the current administration says that its new plan, with its focus on the demand side, would, among other things, help augment the purchasing power of the lower middle class – contrary to that of the former government which had primarily focused on boosting supply by allocating massive financial resources to large-scale housing builders -- a policy that ultimately led to unusually high levels of liquidity and a runaway inflation.

The second move by the Rouhani administration to shore up the housing industry was to establish the so-called 'land and structure funds' to raise money for major constructors in a way that has less impact on general prices.
 
And the creation of a 'mortgage fund' in each commercial bank has been another possible solution recently offered by the government to stimulate demand. These policies, welcome by many, have also attracted strong criticism.

So far, Bank Maskan has been the sole mortgage provider in Iran. If and when the new policy comes into effect, all commercial banks will be obliged to establish special funds to provide thousands of mortgages to prospective clients.

The loan ceiling is expected to hover around 800 million rials (about $25,000) to 1 billion rials ($30,000) depending on the location of the housing unit.

Despite the increase in mortgages, critics argue that they are not at all enough to buy an apartment because the latest data by the National Statistical Center of Iran shows the average price per square meter of a residential unit in the country was 14 million rials ($430) last year. The figure for Tehran dramatically surpassed the average climbing to 32 million rials ($984).

 

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