Is the housing boom plan practical? Concerns about inflation

According to Tejaratnews, the plan to build four million houses over four years was one of the election promises of President Seyed Ibrahim Ra’isi, and since the beginning of the 13th government, he and his Minister of Roads and Urban Development have repeatedly claimed that it will be implemented.

Meanwhile, the parliament has also approved the law on the leap in housing production, emphasizing the issue of building one million housing units annually.

But not only many economists do not consider the plan of the government and parliament practical; Rather, the authorities themselves seem to have realized that their demand is facing serious challenges. However, the Minister of Roads and Urban Development, Qassem Rostami, recently said that “we are not going to build one million houses a year!”

He explained: It is planned to build four million housing units in the country in the next four years, but the promise to build four million housing units in the thirteenth government does not mean that one million units will be built every year. Because we all know that building a house takes about a year and a half.

Despite this, some economic and financial experts on Instagram Live Trade News, Called the plan to boost housing production unprofessional and inflationary, and stressed that the government’s mandatory policies for banks in implementing this plan challenge them.

Diba: The housing plan contradicts the claim of controlling inflation

Mojtaba Diba, a financial markets expert, said: “The plan to build four million housing units contradicts the claim of controlling inflation, and in practice a much smaller number is likely to be built.” However, this plan sends signals to the market.

He added: “Nevertheless, housing is one of the safest markets for investment and there is likely to be no sharp decline in this market.” Stability in this market is more likely until 1402 and 1403.

Awareness: The government’s plan is not an expert

Nima Agahi, another financial market expert, also commented on the housing boom plan: “Governments in the first year of their work, usually with the aim of attracting public opinion and in fact with political goals, come up with plans; The government’s housing plan is similar, and not very expert.

Pointing out that this plan has many ambiguities, he said: “One of the ambiguous issues is whether this plan is defined according to the real price of materials in the market or the mechanism of preferential and imposed prices?”

Agahi added: “Considering the government’s performance so far and the orderly pricing policy, it seems that a second mechanism should be adopted; Because only in this case it is possible to finance the housing project and achieve its goals.

The housing plan has inflationary effects

Emphasizing that the housing plan of the main government has heavy inflationary effects, he said: “This plan, due to the high volume of construction, disrupts the order of related markets, especially steel and cement, and the increase in prices is inevitable.” Is. Finally, the government does not accept responsibility for this price increase.

Agahi added that the plan to build one million housing units annually has no economic justification in general. The implementation of such a plan in terms of the consumer market may have been acceptable in the 1980s and was compatible with the country’s population pyramid, but not today.

He continued: “In Iran, the increase in housing prices is due to the increase in the price of production inputs.” In fact, speculation is not the cause of the high cost of housing, and the cost of production has risen. Production costs cannot be controlled by increasing the number of units under construction.

Housing is not cheap

“This plan will not significantly reduce housing prices,” Agahi said. Perhaps, in the most optimistic case, only a 10% reduction in prices may occur.

According to him, at the same time, there are challenges such as rising inflation and rising currency prices, which neutralize the effect of this plan.

Heshmati: The government’s plan is not practical

Also, Mohammad Heshmati, a financial markets expert on the housing plan, said: “Governments in Iran usually pay attention to the housing market during a recession and go to increase bank interest rates to escape inflation.” These ways are handy and the 13th government should not take them.

He added: the price of housing consists of three parts: land, materials and the cost of the construction license. In the housing leap plan, the government provides the land for free and is probably not too strict for the license. The main issue in this plan is the payment of materials.

Heshmati, referring to the government’s request to build units at a cost of two million and 750 thousand per square meter, said: “It is not possible to build housing with the costs that the government has predicted, and the minimum construction cost per square meter is four million tomans.” In order to achieve the goal of the Housing Leap Plan, either the quality of construction must be greatly reduced or its materials must be provided through mandatory pricing.

Possibility of increasing inflation

He said: “At first glance, the payment of facilities in this plan is very good and people pay the bank installment instead of paying the rent; Eventually they become homeowners, but paying for these facilities on an annual basis of one million units requires a very high number.

Heshmati added that in order to provide the necessary resources, the government may have to divert facilities from the industrial sector to housing, which is causing the industry to stagnate. The second solution is to borrow from the central bank, which increases liquidity.

“Both solutions will ultimately lead to long-term inflation, while the housing boom plan has little effect on lowering prices in the market because people who now own housing are reluctant to sell their assets for half the price, for example,” he said. This plan may only prevent price increases.

Samavati: It is the same as Mehr housing; But with empty pockets

Mehdi Samavati, another financial markets expert, said: “Whenever governments want to intervene widely in the market, it must be avoided.” The Housing Leap Plan is such an intervention; It also has an empty pocket. This plan is not even comparable to Mehr Housing; Because at that time the price of oil was more than $ 100.

According to him, ordinary people and the lower classes experienced the most damage and inflation caused by Mehr housing; Because the highest price growth occurred in units less than 80 meters in metropolitan areas. In fact, the distribution of subsidies does the most damage to the underprivileged.

Lawyer: Housing schemes hurt banks

“The government’s plan is creating a lot of problems for the country’s economy, because 20% of the banks’ resource needs are going to be allocated to it, and this issue, like Mehr Housing, poses many challenges for the banking network,” said a lawyer. Creates.

He explained: “Consumer position and demand in the housing market have become very weak, but the government’s policy in the housing leap plan is wrong and will not help solve this challenge.” The government has no duty to provide housing; Rather, in order for people to become housewives, it must increase their income.

The possibility of creating an inflation wave

Haghshenas said Mehr housing was catastrophic for Iran’s economy and has not yet been completed. Now the same plan is going to be repeated again, which is problematic for banks.

He stressed: “The housing leap plan not only has no effect on reducing housing prices, but also creates an inflation wave in the country.”
Mousavi: The housing project will increase construction costs

Mousavi: Housing should not be out of the pockets of the government and banks

Omid Mousavi, another financial markets expert, said: “In the housing leap plan, projects such as Mehr Housing will probably be built on the outskirts of cities and as a result will not reduce housing in the city.”

He added: “This plan will even raise the price of materials and may increase the cost of housing construction.” In other words, the projects of this project are not a competitor for housing in the city; They are mostly consumer and urban real estate is capital. But the government’s plan could also increase the cost of the second half.

The financial markets expert said that housing should not be done from the pockets of the government and banks. The public sector should legislate to hand over projects to contractors to cover construction costs by pre-selling units to the public; But with long-term installments.

Read the latest housing news on the Tejarat News Housing Market page.