Economy, Domestic Economy

New Blueprint to Help Lift Housing Market

New Blueprint to Help Lift Housing Market
New Blueprint to Help Lift Housing Market

The ministry of roads and urban development will soon unveil a comprehensive plan for the housing sector which officials believe would help millions of people to own houses of their own.

Under the plan, the government seeks to provide all low income earners with housing units by 2025, Mohammad Pejman, the deputy minister of roads and urban development said on Sunday, IRNA reported.

The government is to help people buy homes while trying to avoid price shocks in the housing market, which is experiencing a recession in its second year, the official said.

The comprehensive plan, as a roadmap for the Rouhani administration and the governments to come, is to outline the obligations the governments have towards providing housing for different social classes.

Fardin Yazdani, the official in charge of revising the plan, however, believes that the implementation of the plan depends on how the government acts to remove the existing challenges in the market. As reported by Donya-e Eghtesad, Yazdani divided the challenges into two groups: "Unfinished policy plans" and "internal issues of the housing market".

According to the newspaper, in the first category, Yazdani pointed out the six policies inherited from the past and said that "the unfinished policy plans have given birth to a number of pending projects that have hindered the translation of new policies into action."

He argued that the challenges facing housing officials include "a lack of correlation between macro-economic factors and the housing sector, a lack of a proper social scheme, and the absence of an effective link between housing and urban development plans, as well as a lack of construction supervision."

As to the internal issues, Yazdani noted that certain issues such as high land prices, inefficient financing methods, and the large number of dilapidated buildings in urban areas have all intensified the need for planning to simultaneously address all the problems the housing sector is facing.

Yazdani explained that the buildings 30 years old and above, especially those built with low quality materials are considered as old constructions in Iran. So, nearly 3 million old buildings in urban areas and 2.3 million housing units in rural areas need to be renovated.

As a result, the Housing Blueprint should envisage at least 5.3 million new housing units.

In 2005, it took 8 years for households to buy a house while in 2012 families needed to save for about 12 years to do so, he noted.

>>>Role in Macro Economy

Yazdani explained that the housing sector contributed significantly to the macro economy and said that between 2005 and 2012, "value-added share of housing and construction sector in GDP fluctuated from 5.4% to 5.5%." He added that in 2006, the sector recorded the highest growth. "In the meantime, investment in the sector accounted for up to 4.3% of the total investment in the country."

The ratio of land market turnover to the total investment ranged between 7.1% and 3.3%. During the period, 9.2% to 1.3% of total liquidity in Iran belonged to the housing sector, with 2012 recording the largest share. Moreover, the ratio of housing sector liquidity to total investment ranged from 1.4% to 7.9%.

Besides, the housing and construction sector accounts for 11% of the total employment. The sector has backward linkages with 78 industries and forward linkages with 56 others, according to Yazdani.

He further noted that one unit increase in value added in the housing and construction sector raises GDP by 2.72 units. Similarly, a single unit increase in GDP pushes up value added in the sector by 1.23 units. In the same period, 21% to 24% of banking loans were directed to the housing sector.


In another part of his remarks, Yazdani elaborated on the objectives stipulated for the Housing Blueprint.

He said that the plan seeks to "improve the purchasing power of households, reduce the scope of price fluctuations in the market, reduce government's intervention in the market, help renovate aging structures and adopt preventive measures for violators of construction regulations, encourage industrialization of the construction sector, coordinate housing plans and urban development plans, set up local funds to secure project financing, and link welfare and social security policies with housing plans."

>>>Financing Methods

Yazdani noted that the application of modern methods of financing is difficult. As an essential step to finance the plan, he considered it necessary to envisage a guarantee fund to ensure banking loans are provided.

He said the objective of such funds would be to offer cheap and long-term loans to the low-income groups and residents of illegally-constructed residences to buy, build, renovate or rent housing units through the banking system.

The second way to provide financing is to develop primary mortgage market by increasing the ceiling of loans by 50% of the total price of the housing units for a unit smaller than 90 square meters.

The third program, he said is to launch and strengthen a secondary mortgage market aimed at improving lending power of the banking system, facilitating the process of granting loans to applicants, reducing dependence on government financial aid to primary mortgage market and extend the ceiling of loan repayment time to 25 years from around 15 years now.