Iran's Property Market Prospects for Foreign Investors – by Financial Tribune – Part II

 Iran's Property Market Prospects for Foreign Investors – by Financial Tribune – Part II


Worst Conclusion

According to Abdoh-Tabrizi, the worst conclusion that one could draw from all of this is "that we do not need more houses" since a glut is already plaguing the market.

"But we need a lot of houses," he said, "because around 700,000 marriages take place annually, and apart from that since one in four marriages ends in divorce, that creates the need for extra homes as well."

As an aside, Abdoh-Tabrizi reminds that the real-estate glut is not limited to the housing sector and cites the northeastern city of Tabriz as an example.

The metropolis, with a population of 2 million has 207,000 shops, which means that there exists a retail store for every two households.

"It will take a long time before this overinvestment rebalances," he said.

Infrastructure Bonanza

The government, in its efforts to boost homeownership for first-time homebuyers, raised the ceiling for home loans significantly, offering mortgages with higher adjusted loan to value ratio, from 5-10% in the past to 30% at present.   

According to the expert, Iran needs a bigger mortgage market and foreigners can help this market.  

"A big opportunity has recently opened in Tehran exchange in the secondary mortgage market," he said.

As Abdoh-Tabrizi puts it, the market has potential for billions of dollars of loans with good securitization and collateral.

Next, there is need for the development of old and distressed urban areas where three million households reside. That, Abdoh-Tabrizi says, requires government subsidies which, given the low oil revenues and a gaping budget deficit, is a tall order.

All of this has created opportunities for foreign investors to grab. The country also needs big spending on the construction of roads and bridges.

According to Abdoh-Tabrizi, infrastructure spending can go on for years in Iran.

"Currently, $300 billion worth of infrastructure projects are up for grabs by foreigners," he said.