The government has announced readiness to prepare the grounds for foreign investments in the housing sector.

Many countries with growing populations are losing the race to provide housing to their citizens.
The need for shelter is a function of population dynamics, while the level of housing demand can reflect changing standards of living and expectations.
According to the UN Habitat, 30 percent of the world’s urban population lives in informal settlements, where in deplorable conditions people suffer from one or more of the following basic deficiencies: lack of access to improved water; lack of access to improved sewage facilities; living in overcrowded conditions; staying in buildings that are structurally unsound; or living in a situation with no security of tenure (that is, without legal rights to be where they are, as renters or as owners).
Overall more than 2 billion people across the world are in desperate need of better housing.
A rising demand for accommodation, in the wake of rapid population growth, has become a major dilemma for governments in developing countries such as Iran.
Every year 800,000 new families are formed in Iran but capacity for building houses stands around 450,000 units. Iran’s need for an annual investment of 200 billion rials in the housing sector is out of the capacity of domestic investors.
The government has announced readiness to prepare the grounds for foreign investments in the sector given that Iran needs to build over one million housing units annually. The trend should continue through at least 2010-11.

New Demand
The housing market has an annual pent-up demand for 150,000 housing units and another 650,000 units of new demand.
To alleviate housing shortage and to prevent increase in housing prices, the government plans to build over one million housing units by the end of March 20, 2007.
Former Minister of Housing and Urban Development Ali Abdolalizadeh said last July that the housing market has reached relative stability since 1997. While his ministry was not responsible for real estate prices, economic organizations whose performance has led to a growing two-digit inflation rate must be blamed for this, he stressed.
Noting that housing units do not commensurate with the demand, he pointed out that mass constructors are in charge of building over 48 percent of houses in civil areas.
“The country will have the ability to build 1.5 million housing units per annum in the next three years,“ he said, adding that insurance companies have to cooperate more on construction projects.
Abdolalizadeh along with many of his cabinet colleagues had admitted then that the government has failed to realize the ambitious goal of constructing a million houses annually.
The latest World Bank report indicates that the ministry has had little success in translating housing objectives into reality.
As per a memorandum of understanding signed between Tejarat (commerce), Saderat (exports) and Sepah banks with the Ministry of Housing and Urban Development, the banking system is to further extend its services to mass constructors in the near future.

The housing market has an annual demand for 800,000 units.

Loan Ceiling
As per the document, loan ceiling in lieu of a single residential unit stands at 120 million rials, 80 million of which is to be transferred to the home purchaser on long-term repayment.
In a separate document, Bank-e Saderat has increased the loan ceiling for house purchase on the basis of repayment-on-installment procedure to 80 million rials, which will be handed over for projects with at least 30 percent physical progress and confirmed to be in compliance with construction standards, ISNA said in a recent report.
Both documents have fallen short of taking notice of the fact that paying loans to house purchasers via constructors has given rise to practices of meddling by mass constructors, allowing them to accumulate huge amounts of money, especially in the absence of a supervisory organization to ensure that transfer takes place soundly and in complete compliance with the laws.
Many housing experts are now of the view that instead of banks giving the facilities to mass constructors, they should deal with purchasers directly, going as far as criticizing it as an inflationary policy.

Direct Payment
House loans and other banking facilities were paid directly to the buyers before the Islamic Revolution to help enhance their financial capacity for purchasing a private residence. By reversing that policy and giving the loans directly to the constructors, the government has restricted its own hand in controlling real estate prices and limiting buyers’ choices.
That is why experts say the current policy is inflationary and urge the government to pay the money directly to the potential buyers as a deflationary move.
The Housing (Maskan) Bank continues to hand out loans to construction projects that have made 20 percent physical progress, giving 1.1 million rials per square meter in Tehran and 900,000 rials in other cities, enough to cover maximum 80 percent of total construction costs.
Based on the latest statistics, the Housing (Maskan) Bank had handed out more than 1,827 billion rials worth of credits to constructors in the first five months of the current year (March-July), not to mention more facilities rendered by other banks.
Based on a parliamentary draft, constructors get special discounts on utility charges such as water, electricity and gas, in addition to a further rise in the loan ceiling by Housing Bank for constructors in Karaj, Tehran, Mashhad, Tabriz, Shiraz, Ahvaz and Isfahan, to minimum 1.1 million rials per square meter of the built-up area and maximum 200 million rials per unit.
Head of National Real Estate and Housing Organization Darvishzadeh announced some time ago that during March 2004-05, constructors received as much as 8,500 million rials as loans.
Many government officials have in the past come out in defense of constructors saying without the loans, they would not be able to meet the expenses, not even through higher purchase sales.
Are constructors losers? Why then has their number been increasing sharply in the past decade or so?
Darvishzadeh said constructors are facing dire conditions because of the sluggish housing market, leaving large number of houses in Tehran and other cities unoccupied. The situation is so grave that they are willing to sell the houses at lower than the normal rate. He said the rise in loan amounts aims at preventing further stagnation in the housing market.
For many experts, the main reason for constructors not being able to sell houses is their unreasonably high prices.

Past stock price increases in Tehran Stock Exchange (TSE) were not circumstantial or due to the volume of shares. It was called a “bubble growth“ as a result of short-term excitement in demand. Under such circumstances, it does not take long before demand falls, stocks plummet and the bubble bursts. Now we all know that the current plummeting of the stock market is not as a result of internal factors.
A drop less than 10,000 units is not a sign for the bubble’s burst, but shows the sensitivity and fragility of the market in uncertain circumstances, wherein economic factors are forced to adopt the “emotional path instead of logic“. Both the past growth and the current recession are the result of psychological and political factors. The line to sell shares at the TSE these days is long, but there are no buyers. There have been ups and downs in the stock market, but the present situation is a different story. As some of the stock analysts put it so well, it is a “Black September“ in Iran’s stock market.
Then again, the recession is neither derived from the market structure nor the current conditions that create expectations in the minds of distributors and buyers. As long as such a situation exists, it is unrealistic to expect the market to return to normalcy. Therefore, those who think that the current market recession is a result of psychological factors have closed their eyes to the realities that expectations are the most decisive factors in economy.
The TSE issue has been raised in the corridors of government offices and organizations and has even been put to parliament. The TSE is an important and integral part of the Iranian economy.
The government and parliament have held emergency meetings in recent days on the country’s plummeting stock market, where prices have declined by nearly 30 percent since September 24. The government’s direct presence in the stock market undermines its performance, swells its incompetence, and worsens the situation for shareholders.
Shareholders expect the government to enhance its efficiency at the international level in order to give some hope to the future of the stock market.
The important thing now is to stabilize the market and shareholders’ expectations. This could be possible once the government performs its responsibility to the stock market.
The plunge in stock prices is widely seen as a reaction to the International Atomic Energy Agency (IAEA) vote, and the tensions raised by Iran’s resumption of processing uranium and threat to ban nuclear inspectors.
Ali Akbar Hashemi Rafsanjani, head of the State Expediency Council, recently said that the nuclear standoff was “a very serious and crucial situation.“ He called on officials to put aside confrontational rhetoric, even as he emphasized Iran’s right to nuclear technology, adding, “Managers at this juncture should know that we need diplomacy and not slogans. This is the time for wisdom, the time for seeking windows that will lead us to the goal. This is where we should use all our leverage with patience and wisdom, and without provocation and slogans.“