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EghtesadOnline: Resources of Bank Maskan’s Housing Savings Account, the mortgage loan program of the state-run bank, reached 87.56 trillion rials ($729.74 million) by the end of the Iranian month Dey (Jan. 20), registering an 8.5% rise year-on-year.

Housing Savings Account comprises 12% of the total resources of Bank Maskan, a report published on HIBNA, the bank's news outlet, says. 

HSA is the bank’s primary and most successful initiative created nearly four 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 homebuyers, according to Financial Tribune.

The scheme requires applicants to make an initial deposit (400 million rials or $3,307) and wait out the one-year maturity period for credits with a ceiling of 800 million rials ($6,614) plus the depositor’s down payment, in the capital Tehran. 

In towns with a population of over 200,000, the loans have a ceiling of 600 million rials ($4,960). Buyers in towns with a population of under 200,000 can apply for a maximum of 400 million rials ($3,307).

 

Amid rising home prices of late, the scheme is covering a lower share of the total cost of houses

 

When the scheme was first launched, the interest rate of loans was set at 14%. In February 2017, following a directive of Money and Credit Council, they were reduced to 9.5% in general cases and 8% for those who wanted to buy a home in the rundown neighborhoods of cities. These interest rates make HSA loans the cheapest in the country. 

HSA is said to be a self-sustaining fund since all the resources it absorbs are redirected to boost the financial strength of Bank Maskan for supporting prospective homebuyers through cheap loan facilities.

However, amid rising home prices of late, the scheme is covering a lower share of the total cost of houses.

According to a report by the Persian weekly Tejarat-e Farda, loans granted under this initiative used to cover 40% of the cost of buying a house in Tehran and almost 100% of the prices of houses in cities like Ilam. 

But given the sudden depreciation of the local currency and its domino effect on different markets, including the housing market, and the significant rise in housing prices, particularly in Tehran, loans granted under the HSA initiative currently cover as little as 20% of the average prices of houses in Tehran and this has driven up full withdrawal rates to 13% in the current Iranian year (March 2018-19)

Raising the loan limit ceiling and consequently the purchasing power of first-timers appear to be an effective mechanism to enhance the attractiveness of HSA loans. On the minus side, the rise in installment payments would scare off a significant group of applicants and raise the chances of defaults.

 

Iran Bank Maskan Housing Savings Account Resources mortgage loan Housing Account