Newspaper number: 4286
Date of publication: 12/19/2016
News number: 3364008
Housing financing portfolio
Dr. Mohammad Hashim Betshakan, a member of the faculty of Allameh Tabatabai University of the 11th government, was faced with a legacy called Mehr Housing – as the largest government construction project – with more than 2 million and 300 thousand public audience. Regardless of the technical and engineering problems involved, which are not in the author’s expertise, this huge project lacked a healthy and sustainable financing attachment. So that the most accessible financing mechanism and at the same time the most destructive method i.e. overdraft from the central bank account was chosen as the main financing solution.
The amount of 450,000 billion Rials overdrawn by Amal Moskan Bank alone was equal to 45% of the monetary base of the country. This amount, including the monetary multiplier, caused a sharp growth in liquidity, which itself was one of the factors that caused high inflation in the 10th government. The average interest rate of 5% of the facility should have been covered by the government as a subsidy for the interest rate difference. In the previous period, the maximum amount of facilities granted for the purchase of housing was 200 million rials, which was paid only by the real estate bank, and other banking networks were also prohibited from granting housing purchase facilities. Housing construction facilities were also paid up to 250 million Rials for each residential unit.
Dr. Abbas Akhundi, the Minister of Roads and Urban Development, based on his strategic approach, believed in solid principles for healthy financing of housing and implemented those principles, including things such as not tampering with the powerful resources of the Central Bank, improving the financial capability of households, supporting the regime He pointed out household savings, strengthening and transparency in the Housing Agent Bank, institutional capacity building for housing financing, capital market capacity utilization, and healthy financing of the remaining housing projects. Fortunately, in the past four years, his principled approaches, with the support of the Central Bank, the government and the Islamic Council, have brought lasting and valuable achievements in the field of housing financing for the country and housing applicants, the main points of which are:
1- Completion and installment sale of the majority of Mehr housing units by increasing the individual ceiling of facilities to 400 million Rials and the collective ceiling of facilities to 555 thousand billion Rials without a single Rial of a new credit line and tampering with the powerful resources of the Central Bank, this means financial prudence.
2- Eightfold increase in the ability to buy housing up to 1,600 million Rials by relying on people’s deposits and without resorting to bank overdrafts, this means financial hope.
3- Making the interest rate of housing facilities a single digit without relying on the subsidy for the difference in interest from the government, this means financial mastery.
4- Obtaining cash flow from facility assets through the issuance of mortgage bonds (MBS), this means financial expertise.
5- Extending the possibility of granting housing purchase and construction facilities (up to a maximum of 80% of the investment value) to all banks in the country, this means financial strategy.
6- Setting up land and building funds to support housing supply, this means a financial solution.
7- Improving the lending capacity of Amal Maskan Bank through increasing the government’s capital in Maskan Bank, this means financial strength.
8- Depositing more than 360,000 households in the amount of 60,000 billion Rials in two years in the Housing Savings Fund to gradually benefit from housing facilities, this means financial stability.
9- The method of financing suitable for the low-income groups, the first homes, the residents of dilapidated structures and providing them with a special support package such as a 6% interest rate, this means financial justice.
10- Setting up the first capital supply company specialized in the housing sector to take advantage of the capital market’s capacity for financing, this means financial institution building.
This post is written by monese_ghamgosar