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EghtesadOnline: The government has unveiled its coronavirus aid package for home renters.

According to Governor of the Central Bank of Iran Abdolnasser Hemmati, a total of 200 trillion rials ($915 million) out of the 750 trillion-rial ($3.43 billion) coronavirus bailout will be allocated to low-income renters as security deposit assistance at the lending rate of 13%. 

“About 600,000 households have been found eligible for the security deposit assistance loan,” says Minister of Roads and Urban Development Mohammad Eslami was quoted as saying by Mehr News Agency.

The interest-only security deposit loans worth 500 million rials ($2,288) in Tehran, 300 million rials ($1,372) in large cities with a population over one million, namely Mashhad, Isfahan, Karaj, Shiraz, Tabriz, Qom, Ahvaz and Kermanshah, and 150 million rials ($686) in other Iranian cities will be paid in the name of the tenants but the sum will be put at the landlord’s disposal.

Parvaneh Aslani, the head of the ministry’s Housing Economy Department, said the landlord is required to return the principal (the original sum of money borrowed) to the bank after a year while renters will repay 12-month installments worth 5.4 million rials ($24) in Tehran, 3.25 million rials ($14.8) in large cities and 1.6 million rials ($7.3) in other cities.  

Aslani noted that renters of homes with an area lower than 75 square meters in Tehran and 90 square meters in other cities will qualify for this type of funding. For the time being, the newlyweds of the current year and households with five members as well as those supported by charitable organizations (the Imam Khomeini Relief Foundation and the State Welfare Organization) are the target groups set to receive the security deposit assistance loans.

Single persons and the self-employed are not eligible to receive these loans. 

An official contract with tracking code needs to be finalized between the landlord and renter before the banks can begin the lending process. Workers with fixed income can provide employment verification letter from their employer to the banks and get the loan without any guarantee. 

For others, promissory notes or Justice Shares (shares of government-owned companies that were given to the six lowest income deciles of Iranians 10 years ago) can be used as collateral for the loan. In the absence of either of these, the borrowers need to introduce a guarantor to the bank.

Registration for security deposit assistance loans will start as of next week, starting July 25, at (the same website designed for the National Housing Initiative), she concluded. 



Measures to Help Tenants

The government is taking a series of measures in a bid to help tenants face off exorbitant price rises. 

Latest data published by Central Bank of Iran on its website show that during the third month of the current fiscal year (May 21-June 20), the price of rented residential properties in Tehran and across urban areas increased by 27.6% and 30.7% respectively compared with the similar month of last year.

According to the Statistical Center of Iran, the average Consumer Price Index for rents in urban areas during the four-quarter period to June 20, which marks the end of the first quarter of the current fiscal year (spring), increased by 22.7% compared with the corresponding period of last year. 

SCI had put the annual inflation rate for the preceding quarter, which ended on March 19 (last year' Q4 in winter) at 23.2%. 

The highest and lowest average annual inflation rates were registered for Lorestan and West Azarbaijan provinces with 35.8% and 9.5% respectively.  

According to the SCI report, CPI for rent levels in urban areas (using the Iranian year to March 2017 as the base year) stood at 175.1 in spring, indicating a 3.4% increase compared with the previous quarter. 

SCI had put the quarter-on-quarter rent inflation rate for the preceding quarter, which ended on March 19 at 4%. 

Ilam and Lorestan provinces registered the highest and lowest quarter-on-quarter inflation rates for tenants in urban areas with 9.1% and 0.7% respectively. 

The consumer rent price index in urban areas increased by 23.3% in Q1 over the same quarter of last year. 

SCI had put the year-on-year rent inflation rate for the preceding quarter, which ended on March 19, at 22.9%. 

The highest and lowest inflation rates on a year-on-year basis in the first quarter of the current year were posted by Lorestan with 35.8% and West Azarbaijan with 7.5%. 


Deputy Minister of Roads and Urban Development Mahmoud Mahmoudzadeh says 50% of tenancy agreements extended in the fourth month of the current fiscal year (June 21-July 21) were in conformity with the directive recently issued by the National Coronavirus Headquarters meant to cap rent increases.

Reports indicate that lease extensions increased and home relocations declined during the month under review, he added.

The guideline approved by the headquarters suspends a landlord’s ability to terminate a lease during the time the country is battling the health crisis, as well as for three months after the Health Ministry declares the end of the outbreak. 

Tenancy agreements signed as of June 29 may not increase rents by more than 25% in Tehran and 20% in other large cities, President Hassan Rouhani said on June 28. 

Mahmoudzadeh later explained that the 20% increase cap applies to Mashhad, Isfahan, Tabriz, Ahvaz, Qom, Shiraz and Karaj. He added that the cap is at 15% in other Iranian cities. 

The deputy minister noted that there are some exceptions to the rule. 

“The tenant must have delivered on their commitments during their current tenancy term; in other words, they should not be recognized as a tenant in arrears by the judiciary. Those who have caused financial losses for the landlord won’t be entitled to the new measure. Once the landlord legally sells their property during the lease period, the tenant must move out within two months. The final exception is when the tenant refuses to accept the aforementioned legal rent increase. If the landlord asks for a higher rent [than what was approved], the tenant can refuse to pay the rent without facing the eviction notice,” he said. 

Asked if the new pronouncement is legally enforceable, he said, “Not a single judicial authority is allowed to order the tenant to vacate the premises as per the new legislation. This is a decision made by the Supreme National Security Council of the Islamic Republic of Iran and it goes beyond the jurisdiction of the Iranian Parliament. It does not violate neither the rights of the landlords nor those of tenants. Rather, it will soothe the sentiments of the rental market, particularly in large cities.” 

Mahmoudzadeh stressed that all residential estate deals, including home sale, rental and lease agreements, are required to be registered at the state-run Tenement Management Information System operated by the Ministry of Roads and Urban Development and obtain a tracking code as of June 29, IRNA reported. 

In early May, the taskforce approved a self-executing two-month extension of rental agreements with the termination date falling between February 20 and May 20 to control the spread of coronavirus and help tenants battling job and income losses during the pandemic.



Tax Exemption for 3-Year Rent Agreements 

Landlords willing to sign three-year lease contracts will be granted exemption from vacancy tax and other potential housing tax measures, the head of Housing Economy Department said. 

What's more, landlords who put their rental property on the market before Sept. 21 will be eligible for exemption from vacancy tax, Aslani was quoted as saying by IRNA.   

According to the official, there is a strong possibility that housing and rental market would achieve equilibrium as a result of these incentives. 

The Iranian Parliament voted for the outlines of an updated version of its own vacancy tax as per Article 54 of Direct Tax Code, which was once approved in the Iranian year ending March 2016, as a way to increase the supply of rental housing and the use of homes for the purpose of living as opposed to investment.

“Details of the proposal are expected to be discussed in the parliament this week,” Ehsan Khandouzi, a lawmaker, told Fars News Agency. 

Mahmoudazadeh said last month the nationwide online database of all residential properties across the country will be completed and put at the Iranian National Tax Administration’s disposal. 

“In so doing, INTA will be able to mine the database to track vacant homes subject to Vacancy Tax in less than two weeks,” he said.

Echoing the same remarks, INTA chief Omid Ali Parsa said his administration will start the enforcement of vacancy tax as soon as the ministry finishes its assignment. 

“Empty homes will not be taxed in the first year but they will be subject to tax at the rate of 50% of the property’s assessed rent in the second year and in the third year they will be levied tax at the rate of 100% of the property’s assessed rent. A commission comprising officials of the Roads and Urban Development Ministry, INTA and Municipalities Organization will estimate the rent of the properties,” he said.

However, Parsa believes that these rates and penalties are not high enough to work as a powerful deterrent to ensure all available housing is used.

According to Mahmoudzadeh, a total of 6.6 million households or 30.7% of the country’s 18.1 million urban households in the country live in rented homes.  

More than 2.1 million homes in urban areas are empty and there are about two million second homes. 


government Loans aid package coronavirus Home Renters