EghtesadOnline: The process of issuing building permits in Tehran during the third quarter of the current year (Sept. 22-Dec. 20) has been fast tracked compared with Q1 (March 20-June 20) and Q2 (June 21-Sept. 21) of the current fiscal year, but the number of permits issued still shows a 20% decline compared with Q3 of last year, the head of Construction Engineering Organization of Tehran Province said.
“The number of construction permits issued in Q1 and Q2 was 55% and 38% lower than the corresponding figures of last year,” Saeed Saeedian was also quoted as saying by Hibna.
“The rise in prices of building materials, the general inflation and increase in land prices and the fact that most construction workshops were closed or semi-open due to the outbreak of coronavirus are the main reasons behind the unusual state of housing sector this year. The recession, which has overshadowed real-estate development, is evident in the declining number of construction permits.”
Tehran Construction Material Inflation at 40.8% in Q2
The general price index of construction materials for residential properties in Tehran stood at 698.8 in the second quarter of the current Iranian year (ended Sept. 21), according to latest data provided by the Statistical Center of Iran.
During the four-quarter period ending Sept. 21, the index grew by 40.8% compared with the previous year's corresponding period.
The annual inflation of construction material was 29.3% in Q1.
Compared with the previous quarter, i.e., the first quarter of the current year (spring), which ended on June 20, the index saw a 30.3% rise.
In the first quarter, the construction material price index stood at 536.5 and registered a 17.3% quarter-on-quarter growth.
The index rose by 71.4% in Q1 compared with last year's corresponding quarter.
In Q1, the year-on-year index growth was 31.9%.
When compared with the first quarter, the category of “ironware, rebar, profile for doors, windows and fences” registered the highest growth among all categories of construction materials with a price growth of 63.9%.
This is while “services” recorded the lowest index growth of 5.5% compared with the preceding quarter.
“Ironware, rebar, profile for doors, windows and fences” also witnessed the highest year-on-year and annual price hike with 172.2% and 71.9%, respectively. “Glass” registered the lowest year-on-year price growth with 31.3% and the lowest annual growth with 15.7%.
Building Permit Fees in Tehran Rise 30%
Building permit fees in Tehran increased by 30% as of June 21 compared with last year. The decision was approved by Tehran City Council in the final month of last year (Feb. 20-March 19) as per Tehran Municipality’s 2020-21 budget, but was not enforced until recently due to the coronavirus-related suspensions of housing projects.
Building permit fees depend on the floor area, scope of work and the type of building being constructed or altered. They form part of the overall costs incurred during the development of a built asset.
At present, overall construction costs in Tehran have increased to at least 45 million rials ($173) per square meter. The average building permit fees hovered around 5-7 million rials ($19-27) per square meter last year. With the 30% increase, permit fees have reached 6.5-10 million rials ($25-38) per square meter.
However, a report by the Persian economic daily Donya-e-Eqtesad says, such fees will exceed 20 million rials ($77) in some northern districts of the capital city, particularly for high-rise building projects.
In accordance with a memorandum of understanding recently signed between Iranian Municipalities Organization and Urban Regeneration Corporate Holding Company, affiliated to the Ministry of Roads and Urban Development, building permits in slum areas will be granted free of charge.
According to Deputy Roads Minister Mehdi Obouri, builders who planned to build residential properties in slum areas were previously entitled to a 50% discount in permit fees. The current MoU offers 100% exemption in permit costs.
“Fifty percent exemption in architectural and engineering expenses has also been envisioned in an agreement signed between Iran Construction Engineering Organization and the Interior Ministry’s Development Department to encourage home owners in slum areas to rebuild their homes,” Obouri was quoted as saying by Iran Online.
Before the 30% increase, permit costs accounted for 5 billion rials ($19,230) of the overall costs of developing a typical building in Tehran (i.e., a 4-5-story building comprising 8-10 residential units each with a floor area of 80 square meters, constructed on 300 square meters of land) in popular districts of Tehran.
Besides building permit fees, real-estate developers say overall costs of construction are expected to increase on the back of strong growth in the prices of construction materials and land. Costs of construction materials, they say, are now 50% higher compared with the first half of last year (March 21-Sept. 22, 2019).
The average price of a square meter of land in the year ending March 2020 increased by more than 90% compared with the year before. By June 20, land prices rose by 15% in some neighborhoods compared with March.
Tehran Housing Prices Rise by 99% YOY
A total of 2,555 homes were sold in the capital during the ninth month of the current fiscal year (Nov. 21-Dec. 20), registering a 42.8% and 73.2% decline compared with the preceding month and the same month of last year respectively.
Latest data published by the Central Bank of Iran on its website also indicate that the average price of each square meter of a residential property in Tehran stood at 269.05 million rials ($1,034) during the month under review, showing an increase of 98.9% over last year’s same month, as average prices reached 135.25 million rials ($520).
Home prices in the capital city decreased by 1.1% compared to 271.93 million rials ($1,045) in the eighth month of the current year.
During the nine months of the current Iranian year that started on March 20, the number of home deals finalized in Tehran totaled 70,598, which shows a 42.9% rise year-on-year.
In the same period, the average price of each square meter of a home in the capital stood at 222.6 million rials ($856), signaling a YOY surge of 74.2% compared with the nine months of last year.