Iran’s Housing Sector Seeks Smoother Path for Construction Financing
Industry representative highlights challenges in accessing credit for both national housing initiative and urban development projects.
Tehran – Farashid Pourhajat, Secretary of the National Association of Home Builders, has outlined the current financial landscape for housing projects in Iran, identifying two primary tracks: government-led projects under the “Housing Production Leap” initiative (National Housing Movement) and general urban construction.
While the funding mechanism for the first category is clearly defined, reports indicate that banks have not provided sufficient support for the projects within the National Housing Movement. For the second track, which encompasses general urban construction, Maskan Bank is recognized as the specialized financial institution. However, Pourhajat stated that the bank’s current conditions for granting facilities are not optimal.
Cumbersome Processes Hinder Progress
Despite repeated emphasis on the unsuitability of the current loan payment methods, no significant change has occurred in this domain. Securing a loan from Maskan Bank is not only difficult but is also disbursed in installments through civil partnership contracts—a process accompanied by complex bureaucracy.
Pourhajat further emphasized that obtaining these facilities is contingent upon acquiring specific loan securities (Tas’a), and even at the stage of executing approved contracts, numerous problems exist. Consequently, both in government-led Housing Production Leap projects and in urban construction plans, the process of financing and loan disbursement faces serious obstacles and limitations.
Increased Costs and Operational Delays
“This process, unfortunately, drastically increases production costs,” Pourhajat explained. “Simply put, Maskan Bank states that builders must first begin construction, and then, based on the physical progress of the project, facilities are released step-by-step.”
In effect, the loan intended to initiate a project is practically allocated to its completion. This procedure began in 2022 (1401 by the Iranian calendar) and, to this day, no change in Maskan Bank’s approach or performance has been observed.
Calls for Supportive Banking Measures
In addition to these challenges, builders are forced to procure expensive loan securities to qualify for financing. Furthermore, the conditions for the installment sales of completed units are not structured in a way that meets the country’s construction needs.
According to Pourhajat, despite official correspondence and proposals submitted to Maskan Bank, no positive or effective action has yet been taken by the bank, which serves as the primary agent for the nation’s construction sector, beyond a single promise to hold a meeting—a promise which itself remained unfulfilled. The industry continues to seek more streamlined and supportive financial mechanisms to bolster housing construction.
