EghtesadOnline: The minister of roads and urban development has announced that further cuts in home loan rates, already in the single-digit territory, are on the cards with President Hassan Rouhani supporting the idea.
Abbas Akhoundi also told Tasnim News Agency on Tuesday that he has proposed the idea of reducing the interest rates for Housing Savings Account depositors–currently at 9.5%–to 6% and since President Hassan Rouhani is behind it, the measure is likely to be officially approved.
The government-owned Bank Maskan is the agent bank of the housing sector and the organizer of Housing Saving Accounts launched in June 2015. Other lenders, however, were allowed to offer the loans but few started to dole out the loans.
The scheme requires applicants to make an initial deposit and wait for a year to become eligible for credits that have a ceiling of 1.6 billion rials ($32,000) in the capital Tehran and lower in smaller cities and towns, according to Financial Tribune.
The interest rate on the loans were initially 14% but were gradually reduced until last year President Rouhani ordered them to be further cut to a single digit to increase home ownership among youth population.
The current interest rates already make the loans the cheapest in the country.
Akhoundi also announced that he has also proposed further increasing the ceiling of the loans to 2 billion rials ($40,000), but that would need the approval of the Money and Credit Council–a decision-making body headed by the governor of the Central Bank of Iran.
Abolqasem Rahimi Anaraki, CEO of Bank Maskan, told Fars News Agency on Tuesday that his bank would agree to an increase in the mortgage ceilings, only if borrowers have the ability to repay the loans.
The announcement comes amid the government's efforts to revive the housing sector that has started to show signs of recovery after four years of recession.
Signs of Housing Recovery
The latest CBI stats show the number of home sales in Tehran during the previous fiscal year (ended March 20) surpassed 181,200, marking a year-on-year increase of 11.8%.
However, toward the end of the fiscal year, real-estate residential deals began to lose steam, as CBI reversed its monetary easing policy to prevent a slide in the value of rial.
According to CBI figures during the month to March 20, a total of 12,307 real-estate residential deals were registered, showing a meager rise of 0.5% YOY.
The increase in interest rates seems to have caused liquidity to be redirected toward banks and away from home construction.
On the other hand, officials are worried about a possible jump in prices in the current year at a rate surpassing the inflation. CBI figures are indicative of an 11.5% annual increase in home prices during the previous fiscal year versus an average inflation rate that stood at 9.6%.
During the one-month period, the average price of each square meter of a housing unit stood at 57.6 million rials ($1,190), up by 4.6% and 26.1% compared with the previous month and the same month of the previous year respectively.
On Tuesday, Ali Chegini, the head of Housing Planning and Economics Office affiliated with the Roads Ministry, sought to assure the public that the housing sector is not up for any disruptions and that recovery would accompany reasonable price rises.
"A steep growth is not expected in any variables of the housing sector," he was quoted as saying on the ministry's website.
Forex, Gold Markets
Akhoundi also weighed in on two other volatile markets in his interview with Tasnim, saying that the gold and foreign exchange markets would continue to be the more "attractive" markets during the current year.
A few days into the Norouz holidays on March 26, the rial had slid to an all-time low against the dollar that was traded for 52,000 in the open market.
While the greenback had been bullish during the final days of the previous year, the exchange rate crossing the psychological threshold of 50,000 rials came as a surprise.
Local media on Tuesday reported that many exchange shops refused to sell hard currency to buyers, forcing them to approach street traders.
The benchmark Bahar Azadi gold coin fetched 17.35 million rials, slightly up on the previous day.