Under the administration of Iranian regime president Masoud Pezeshkian, Iran’s housing loan system is currently facing significant scrutiny due to rampant corruption and debilitating inflation, which have all but crippled the effectiveness of housing loans. The government recently announced a reduction in the previously approved housing loan cap from 8 billion rials to 6.5 billion rials, sparking deep skepticism about whether even this reduced amount will be disbursed at all.
Corruption and Misallocation of Resources
A critical issue plaguing the Iranian banking system is the widespread corruption and misallocation of financial resources. Reports indicate that banks impose rigorous conditions on loan applicants, such as requiring multiple guarantors, thorough credit assessments, and the purchase of bonds. These conditions make it practically impossible for ordinary citizens to access housing loans. According to the Central Bank of Iran, fourteen major banks reported zero disbursement of housing loans three and a half years after the launch of the “National Housing Movement” plan, despite a legal mandate requiring banks to allocate 20% of their financial facilities to this sector. Instead, these banks have disbursed only a mere 2.5% of the mandated share.
Rent Distribution and Favoritism
Iranian banking facilities have increasingly become tools for “rent distribution,” favoring powerful sectors and “super debtors” over the average citizen. For instance, Bank Maskan, which specializes in housing finance, has directed significant resources to the auto parts manufacturing group Ezam, one of Iran’s super debtors, instead of disbursing these funds as housing loans. This stark diversion of resources underscores the challenging disparity between influential entities and everyday Iranians trying to secure housing loans under stringent, often prohibitive conditions.
High-Interest Rates and Ineffective Loans
High-interest rates further exacerbate the barriers to accessing housing loans in Iran. The current repayment structure of the 6.5 billion rial loans involves graduated monthly installments, ultimately forcing the borrower to repay substantially more than the initial loan amount. Persistent inflation has severely devalued the Iranian rial, diminishing the practicality of these loans. For instance, with the present average price per square meter of housing in Tehran, a 6.5 billion rial loan can only cover around 8.7 square meters of property—a rather negligible amount for potential homeowners.
Exclusion of Low-Income Citizens
Additionally, the requirement for citizens to purchase securities amounting to one-quarter of the loan value to qualify for disbursement further excludes those without initial capital. Housing market expert Majid Goodarzi has criticized this obsolete loan structure, noting that such practices are virtually nonexistent in other parts of the world. This outdated method adds yet another layer of difficulty for those seeking to purchase homes, particularly affecting low-income individuals who are either unable or unwilling to tie up their limited capital in securities.
Need for Substantial Reform
Under the leadership of Iranian regime president Masoud Pezeshkian, Iran’s housing loan system is under significant scrutiny. It is plagued by rampant corruption and debilitating inflation, severely hampering the effectiveness of housing loans. These systemic issues have made it nearly impossible for ordinary Iranians to benefit from these loans. The situation worsened recently when the government decided to lower the previously approved housing loan cap from 8 billion rials to 6.5 billion rials. This decision has sparked widespread skepticism and concern among the population. People are deeply uncertain about whether even this reduced loan amount will be disbursed. Many fear that the pervasive corruption within the system will prevent them from accessing these loans altogether. The reduced loan cap, amidst the soaring prices of housing due to inflation, seems grossly inadequate to meet the needs of the people. This adjustment, rather than providing relief, has only heightened the sense of distrust and despair among those seeking to own homes.
