Housing market in Iran:the new loans

Data released by Central Bank of Iran (CBI) shows that average cost of each square meter of house in Tehran is 39.2 million Rials (for Jan-Feb 2016), this prices has 3 percent increase compare to previous month and 1 percent decrease relative to same month of last year.

Recently the Money and Credit Council of Iran approved 1,600 million Rials for new couples (each one 800 million Rials) in Tehran, if a couple get the full amount of this loan by considering the average price of houses in Iran, they would be able to buy a 40.8 square meter house. This kind of loan is so attractive for people, the interest rate for this loan is 13 percent, and the repayment period is 12 years; by this conditions the amount of each repayment is near to 2 million Rials per month. The only negative point of this loan is the amount of its repayment, because the minimum salary in Iran for current year is 0.812 million Rials, if both partner work and they receive the minimum salary, they can only cover only 80% of the repayment amount. This percentage of coverage is calculated by assuming that the couples do not spend any more on other expenses.

Target market of this Loan is limited to only new couples which do not own any home. The number of new marriages during the first 9 month of 1394(Persian year) in Tehran was 66,546 and in the whole country it reached to 120,240 that shows decrease around 3.4 percent compare to previous year. It’s amazing that about half of marriages in Iran, is happened in Tehran and suburbs.

Couples must deposit 800 million Rials for one year in Maskan Bank of Iran, after that they can get 1,600 million Rials, so the money from this funding will be entered to housing market next year.

Until now the reliable data of couples who apply for receiving this loan has not been published for this year. But for the Maskan Yekom fund that its ceiling amount of loan was 800 million rials for Tehran couples, 28,000 person has registered which is near 23 percent of new marriages. So if 23 percent of new couples register for this loan in Tehran it means that nearly 15,300 couples will ask for it. So it can be estimated that 24,480,000 million Rials will be charged to housing market in Tehran.

Data for first 11 month of 1394(Persian year) of CBI shows that in Tehran real state traded value was about 403,394,700 million Rials.

So in the end, data shows that the amount of this loan (24,480 billion Rials/403,395 billion Rials) is 6 percent of Tehran’s housing traded value, it is far away from persuading housing market to growth.

Source: How to Invest in Iran. Date: April 17, 2016