Housing construction under inflation!/ Who are the losers in the housing sector? – Tejarat News

According to Tejarat News, inflation and other economic problems in recent years have caused many problems in the housing market. The sharp increase in prices, especially since this fall, has greatly reduced people’s purchasing power. On the other hand, the lack of demand and the increase in construction costs have reduced the desire of mass builders to build residential units.

These cases have put the transaction in the housing market in a downward trend compared to the past few years, and now the housing sector is the arena of various problems that cannot be solved without smoothing the macroeconomic crises.

Also, the sanctions have made it possible for foreign mass producers to be present in Iran to zero. But what is the investment status of Iranian builders on the other side of the borders?

Seyyed Mohammad Mortazavi, the head of the National Association of Mass Housing Builders, in a detailed interview with Tejarat News, has reviewed the construction situation in the country, the capacity of mass builders to produce housing and foreign investment in the real estate sector; Earlier, in the first part of this conversation, titled “Building government housing at the price of selling oil cheaply!” / With what mechanism do the Chinese enter the Iranian real estate market? The issue of China’s entry into Iran’s housing sector and the exclusion of the private sector was discussed.

In the second part of this conversation, which is titled “The drastic reduction of investment in housing / What is the way to save the real estate market?” was published, the problems of investment in the housing sector were investigated; You are now reading the third and final part of this conversation, which is devoted to the investigation of the effect of inflation on the boom and bust of the real estate market and the presence of Iranian investors in the construction of foreign countries.

Reduction of construction motivation with the entry of excitement into the market

The head of the National Association of Mass Builders first discussed the accelerated inflation and its impact on the housing market. Referring to the housing boom and bust periods and its relationship with the construction situation, Mortazavi said: naturally, fluctuations and multiple price increases in the short term create excitement in the market and raise the issue of speculation and mediation; But after this period and the excitement subsides, the market will enter a period of stagnation.

He continued: In this period, neither producers will be able to be present in housing production and transactions, nor will people be able to be present on the demand side. Even buying at the lowest price – in a way that brings the minimum profit to the manufacturer or seller – will be out of reach for them as a consumer product.

Mortazavi said: Therefore, in the short term, these excitements may create a number of transactions and the transaction market will heat up in a period, but this market is a weak and unstable market.

Loss making of housing pre-sale in inflationary conditions

The head of the National Association of Mass Housing Builders also explained about the pre-sale situation in inflationary conditions: At these times, those who pre-sell their buildings are losers; Because their final price increases and the pre-sale price is fixed. But in supportive housing contracts, the amount of pre-sale is not fixed, which means that adjustments are applied in the contracts, which of course is in conflict with the current laws.

He continued: Of course, if it is examined from the economic aspect, the price and cost of all goods and services are increasing, and therefore the rates cannot be kept constant. In the meantime, private contracts are fixed due to the prohibition in pre-sale laws.

This private sector activist added: However, if the financing is not in the form of pre-sale, the builder may face profit, or if the builder himself can finance zero to 100 projects, he may make a profit.

The effectiveness of the real estate market from the devaluation of the national currency

Mortazavi stated that in a situation where prices are multiplying, the occurrence of a recession in the real estate transaction market is certain, and stated: It is not possible to provide a specific prediction about the range of price increases; Indicators are information and data that we do not have. For example, part of the increase in the price of the currency or the decrease in the value of the national currency comes back to a series of issues that we in the private sector do not know about; For example, we don’t know how much the government has access to currency; He may have access to currency today and not tomorrow.

The head of the National Association of Mass Housing Builders continued: These things have a great impact on inflation. In another example, if currency enters the country today, everyone knows that it is a positive event, prices will be controlled and the national currency will not fall further; As a result, inflation is also curbed and its slope is reduced. A process that the government itself emphasizes on, but it is beyond their will in some cases.

He continued: Therefore, it is unknown how long the current situation will continue. In 1367, the country faced a decrease in the value of the currency, which continues until now and has been stable only in some short periods. There has always been this lack of information and uncertainty in forecasting resources and sales. Accordingly, it is not clear how long the inflation will continue and at what level it will stop.

Mortazavi added: As long as there is inflation, the market will be affected by emotions. In such a situation, there will be an incentive to buy and be in the market, but consumers may leave the market and the field will fall into the hands of speculators! Currently, the same thing is happening and traders are appearing in the market instead of them. But since inflation leads to the growth of inflationary expectations and as a result the market heats up, whenever inflation can be controlled, we will enter the period of housing market stagnation.

The free fall of the construction industry’s share of GDP

The head of the National Association of Mass Housing Builders further pointed out the share of the housing sector in the country’s gross product and explained: the share of the construction industry in GDP has reached 30% in some periods. We have also experienced a 20% share in a good period.

He added: Currently, the share of the construction industry in GDP has decreased greatly and is between 6 and 8 percent. However, the statistics show that the capacities are such that if the conditions and economic stability are provided, the share of the construction industry in the GDP can increase to at least 20% in the future.

The backwardness of investment of Iranian artisans in foreign countries

As the head of the National Association of Mass Housing Builders has said, due to high inflation in Iran and unpredictable economic conditions, the security of capital to enter the housing sector has been lost. But has the private sector been able to enter the field of construction at least on the other side of the borders? What challenges do construction workers face in this field?

Referring to the significant decrease in investment in Iran’s housing sector, Mortazavi said about the presence of investors in the construction field of foreign countries: There have been case-by-case experiences in the past, which also went back to the creativity of mass builders and private sector builders; But basically, to be present in another country, a guarantee is needed, and Iranian banks must guarantee the services provided; But this guarantee is not possible due to restrictions in international relations!

He continued: the presence of Iranian investors in foreign countries endangers the security of their capital; Because it is not possible to return their financial resources and they cannot return their money to the country or receive it in the correct and usual way.

The head of the National Association of Mass Housing Builders added: Iranian investors may also be condemned and forced to pay instead of receiving money due to international sanctions and restrictions. This is despite the fact that clearing is not a correct form of business and the producer should not be forced to clear his product with another product.

Mortazavi also stated: Some mass builders are forced to cooperate with other companies in foreign countries and to do construction in a third country with a common goal, which in fact should use the legal facilities and name of another company. do But this process is not for our internal interests. In general, it can be said that almost no success has been achieved in these sectors in recent years!

He explained about the impact of sanctions on foreign investments: this type of investment is under the shadow of sanctions, and in short, we can say that we have not achieved anything; Of course, studying success in this field is not possible with the current conditions.

The head of the National Association of Mass Housing Builders said: Even in countries like Iraq and Syria, which are considered friends and partners, Iran has not been successful in terms of transferring technical and engineering services.

He continued: Since these countries also face many problems, such as Iran’s trade barriers, and are facing difficulties in transferring financial resources, they are not willing to be put under extra pressure to work with the Iranian mass producer.

As it is clear from the statements of the head of the National Association of Mass Housing Builders, the investment situation in the housing sector is in serious danger due to high inflation and insecurity of investment and is approaching critical conditions.

At the same time, inflation and sanctions have made builders run away from the real estate market, according to estimates, Iran needs at least one million new residential units every year. However, not only the private sector is pushed back from the production sector, but also the government is unable to fulfill the annual slogan of one million housing units (National Housing Movement Plan).

It seems that until the government is able to improve the macroeconomic situation, control and reduce inflation, and at the same time think of a solution for international trade and economic openings, Iran’s housing market will continue to face the problem of low supply and high demand.

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