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EghtesadOnline: As Iran's housing sector is hard at work fighting off a returning recession triggered by the currency crisis, the state-run agent bank of the sector is pumping out facilities faster than ever to compensate for a dwindling purchasing and spending power.

Bank Maskan registered considerable increases in its loan output during the first six months of the current Iranian year that ended on Sept. 22, with home purchase loans accounting for the highest year-on-year rise, a report published on HIBNA, the bank's official news outlet shows.

From the start of the current year on March 21 until the end of the first half, a total of 111,200 households in cities across Iran bought houses through Bank Maskan loans. 

The facilities were doled out in various forms, including bond facilities, savings funds and the Housing Savings Account, according to Financial Tribune.

HSA is the bank's primary and most successful initiative created a little over three years ago, which requires applicants to make down payments and wait for a year to become eligible for the cheapest home loans in the country. Target applicants mostly constitute first-time prospective homebuyers and people living in distressed urban areas.

"The financing record of Bank Maskan during the current year is a record not just in terms of the increase in payments but in terms of the number of allocated loans," the lender wrote in its report.

Before the lending basket of the bank became varied, it said, its lending capacity was so limited that it could finance homeownership of up to 100,000 Iranian households in any given year. 

Now, as the bank is able to allocate a variety of facilities with different rial ceilings that can accommodate more families with different financial capabilities, it has been able to finance in just six months more families than it could in a year.

"The significant rise in lending to homeownership applicants has been evident in the rise in the number of home deals across cities," the bank said.

All-in-all, Bank Maskan allocated 243,000 loans in the housing and construction sector during the first six months of the current year, the report shows. The value of those loans totaled 90 trillion rials ($642.85 million). The loans, therefore, indicated respective year-on-year hikes of 46% and 37% in terms of numbers and value.

Loans allocated for purchasing homes accounted for a majority of facilities handed out by the bank during the period. Bank Maskan paid 111,200 loans worth 54.70 trillion rials ($390.72 million) to homeownership applicants across the country, indicating a 63% and 55% surge compared with the first half of previous years in terms of numbers and value respectively.

The bank said "this volume of growth in the coverage of home purchase applicants has been unprecedented in recent years".

> Decline in Loans to Builders

However, the recent downturn in the housing sector is evident in Bank Maskan's data.

Civic participation facilities allocated by the lender to builders and homebuilders during the first half of the current year declined by 12% on a year-on-year basis. This is while the bank's basket of facilities has actually diversified compared to last year and now includes home construction loans that can be allocated to builders without the need for them to first make deposits and wait.

"The housing construction market has experienced a slight recession in recent months due to the negative impact of economic changes and a rise in construction material prices, which have distanced from last year's boom," the bank wrote.

It also said builders have refrained from starting new property construction projects due to fluctuating land and construction material prices, as well as uncertainty about the future.

When US President Donald Trump unilaterally withdrew from Iran's nuclear deal with world powers in May, a psychological effect ensued which, coupled with structural problems in the economy, engulfed Iran in an ongoing currency crisis. The crisis rocked other markets and sectors, including the housing and construction sector that contracted by 2.2% during the first half of the current year after enjoying four quarters of growth.

> Rise in Resources Outpaced by Lending 

Bank Maskan's report said its lending operations accelerated to a degree during the first half of the current year, such that its trajectory even surpassed the bank's rise in resources.

For instance, during the sixth month, the entirety of resources owned and run by the bank increased by 22.5% compared with the sixth month of last year, whereas the total volume of loans allocated increased by 23% compared with the similar period of last year.

"Currently, housing sector financing is such that the coverage offered to loan applicants is rising while resources are relatively limited," the bank wrote, signaling that it might face capital shortage in the future, if the current trend were to continue.

The administration of President Hassan Rouhani aims to transform Bank Maskan into a specialized development bank in the near future. The plan, fully supported by the Ministry of Roads and Urban Development, has yet to yield any tangible results, but includes a major capital boost that could potentially alleviate resource shortage fears.

 

Iran recession Bank Maskan currency crisis Housing Sector Loans