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EghtesadOnline: Stock market authorities are planning to launch a real estate exchange market to help address mounting challenges of the housing sector, a member of the High Council of Securities and Exchange said.

According to Hossein Selahvarzi, who also is vice president of Iran Chamber of Commerce, Industries, Mines and Agriculture,  the real estate market will be the fifth bourse in Iran’s capital market. 

Selahvarzi said launching a real estate bourse will help improve transparency in the key housing sector, the ICCIMA news portal reported. 

“It will be an opportunity to make the [housing] market competitive and improve transparency. This will also help in setting a benchmark,” he said, speaking on the sidelines of a meeting with senior stock market officials on Saturday. The session discussed the feasibility of the plan.   

“Capital markets are capable of defining appropriate instruments to finance big real estate projects in which the people will be able to partake.” 

He said the initiative will be launched with a nominal capital of 50 trillion rials ($250 million) half of which would be put up by investors via subscription, 25% each by government-affiliated entities and private companies.  

A real estate exchange is a rather novel initiative not known in other countries and causing many to doubt its feasibility. 

Addressing skeptics, Shahin Cheraghi, also a member of bourse council present in the meeting, said “subject to their economic conditions, countries use different instruments to shore up the economy”. He did not elaborate.

Pointing to the dire conditions of housing sector in Iran and home prices going up on almost a daily basis, Cheraghi said major construction projects are incomplete due to the inability and unwillingness of state and private banks to lend.


3 Pillars

The government, people and builders will be the three pillars of the real estate bourse.

“Government can offer land, builders’ input could be technical and executive expertise and people will put up the money,” he said. 

The plan comes as home prices, real estate and construction costs have jumped up several hundred percent in the past three decades making it almost impossible for the working class, especially the youth, to even buy a small apartment.   

Unable to extend adequate funds to boost the critical housing shortage, the government recently approached the stock market to secure funds to build low-cost homes.   

Earlier last month, Mohammad Ali Dehqan, a deputy economy minister spoke about a plan to create Real Estate Investment Trusts (REIT) to help the ever struggling housing industry.

Designed to pool the capital of investors, REITs make it possible for individual investors to make a reasonable profit in real estate -- without having to buy, manage, or finance the properties themselves.

Many REITs are publicly traded on major securities exchange and investors can buy and sell them like stocks.

Underscoring the role of REITs in funding housing projects, Dehqan referred to the government-backed National Housing Initiative and said such schemes can help attract public savings into the credit-starved housing sector. 

Under the NHI scheme, the government has said it intends to build 400,000 affordable homes for first-time homebuyers, namely the middleclass. 

This implies that the cost of an apartment offered by the NHI would not be much lower than the prices in the market that have long become prohibitive leaving millions on the wayside.


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