Construction industry of Iran

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Seventy percent of Iranians own their homes according to Central Bank of Iran. Tehran skyline may 2007.jpg
Seventy percent of Iranians own their homes according to Central Bank of Iran.

The construction industry of Iran is divided into two main sections. The first is government infrastructure projects, which are central for the cement industry. The second is the housing industry. [1] In recent years, the construction industry has been thriving due to an increase in national and international investment to the extent that it is now the largest in the Middle East region. The Central Bank of Iran indicate that 70 percent of the Iranians own homes, with huge amounts of idle money entering the housing market. [2] [3] Iran has three shopping malls among the largest shopping malls in the world. Iran Mall is the largest shopping mall in the world, located in Tehran. The annual turnover in the construction industry amounts to US$38.4 billion. [4] The real estate sector contributed to 5% of GDP in 2008. Statistics from March 2004 to March 2005 put the number of total Iranian households at 15.1 million and the total number of dwelling units at 13.5 million, signifying a demand for at least 5.1 million dwelling units. Every year there is a need for 750,000 additional units as young couples embark on married life. [5] At present, 2000 units are being built every day although this needs to increase to 2740 units. [6] Iran's construction market will expand to $154.4 billion in 2016 from $88.7 billion in 2013. [7]

Contents

History

For a decade after the revolution, the land question, especially in cities, was among the most contested issues in the Islamic Republic. The collapse of state authority, coupled with the populist convictions of the new regime and spontaneous popular land occupations labeled as "revolutionary housing", led to the dramatic expansion of cities. Tehran doubled in size within two years, and Ahvaz tripled in area from 23 to 75 square kilometres (9 to 29 sq mi). But only a small fraction of this geographic expansion was confiscated private land. The rest, more than 90 percent of the total distributed, had been public land. From 1979 to 1993 nearly half a million hectares of predominantly public unoccupied land was converted into private and cooperative residential property. New state institutions like the Urban Land Organization and the Housing Foundation played the key role in this massive transfer of property. By the mid-1980s more than 60 percent of all urban residential land transactions were being allocated by the state. [8]

This large-scale transfer of mostly public land, coupled with the absence of enforceable regulation, transformed Iran’s urban geography. Between 1979 and 1982, 75 percent of all new construction in Tehran occurred outside the formal city limits, where satellite villages were transformed into sprawling suburbs. Remarkably, by 1986 urban housing stock had doubled, as Housing Ministry surveys showed that more than half of all urban dwellings in the entire country had been built after the revolution. It was private individuals who built these 2.3 million new units. The state merely transferred the public land into private hands; its share of investment in housing construction (affordable or otherwise) was less than 2 percent of the total after the revolution. [9] Following an extraordinary boom in the Iranian real estate market between 2004 and 2007, activity in this market suddenly slowed down from early 2008. In 2009, construction activity was at its lowest level for the past eight years. Since 2010, this sector has experienced a modest recovery.

Labour

In 2024 it was leaked that Chinese companies used Chinese prisoners as contractors for construction in Iran. [10] [11]

Market

Age of residential units in Tehran ending 21 May 2015. [12]

  Less than 5 years (54%)
  6–10 years (16%)
  11–15 years (17%)
  16–20 years (7%)
  More than 20 years (6%)

The Central Bank of Iran indicate that 70 percent of the Iranians own homes, with huge amounts of idle money entering the housing market. [2] [3] The housing industry is one of the few segments of the Iranian economy where state capital shares as little as two per cent of the market, and the remaining 98 per cent is private sector investment. There is little red tape or hurdles and, as a result, through launching mass development projects, the use of new technologies and fast-pace project execution, a larger portion of the housing market is accessible. This is also true for new construction materials and technological advances.

Average price and cyclic growth rate of 1 m2 of housing in metropolitan areas (1992–2007) in USD [13]
MetropolisAverage price for the 2nd half of 2007Cyclic growth rate
Tehran 1,51524.1
Mashhad 58523.3
Esfahan 68022.6
Tabriz 44821.8
Shiraz 44721.6
Karaj 65723.1

Around 3 to 6 percent of housing units constructed yearly are solely for renting purposes. Around 20 percent of housing units in urban areas are rented. The average annual increase in house prices has been around 20 percent over the past ten years with a peak reached between 2006 and 2008.[ citation needed ] The average size of housing units has been around 80 square meters over the past five years. [14] At present, the average price of a housing unit in urban areas is about 10 times the annual income of an urban household. Average construction cost for 1m² of urban residential buildings in the first half of 2008 was $350. [13] In January 2014, prices in Tehran were $1275 per square meter. [15]

In 2011, Iran implemented a national electronic system for the registration and tracking of real estate transactions in order to bring more transparency to the market (97% of real estate transactions and ownership changes have been recorded in the new system).

Mehr Housing Scheme

Mehr Housing project in Iran. Maskan e Mehr house project - Janbazan blv - Nishapur 3.JPG
Mehr Housing project in Iran.

Mehr project, designed in 2007, aimed to cover a part of house shortage through building of around 2 million housing units within 5 years. [16] As of January 2011, the banking sector, particularly Bank Maskan has given loans up to 102 trillion rials ($10.2 billion) to applicants of Mehr housing project. [17] [18] Under this scheme real estate developers are offered free lands in return for building cheap residential units for first-time buyers on 99-year lease contracts. The government then commissioned agent banks to offer loans to the real estate developers to prepare the lands and begin construction projects in an attempt to increase production and create equilibrium in the supply and demand curve (2008). Close to 400,000 units have been built and permits have been issued for another 12,000. [19] Mehr Housing project is expected to provide 600,000 residential units in its first phase. [20] About 3.7 million people have so far registered for Mehr Housing Plan (2008). About 10 million rials is to be paid by applicants for preparing the land and another 10 million to be given by the government in the form of banking facilities. Applicants should pay about 20 percent of the construction costs. In addition, about 140 million rials worth of housing loans will be granted to them (10,000 rials=1 USD in 2008). [21] While most Iranians have difficulties obtaining small home loans, 90 persons have managed to secure collective facilities totaling $8 billion from banks.[ citation needed ] Problems regarding lack of utilities has been reported for the project, including lack of access to water, power, gas, and sewerage lines. [16] Starting in 2014, the Mehr housing scheme will be taken off the balance sheet of the Central Bank of Iran. The government of President Rouhani announced that by 2017 the Mehr housing project will be replaced with cheap loans to needy families with the stated objective to build only 150,000 homes on a yearly basis. [22]

Restorations

Restoration of old buildings is one of the priorities for the Government of Iran. Estimates show that about US$143 billion needs to be allocated in the next 10 years for restoration of 14,000 meters of critically decaying buildings. [4] The government will earmark 11.5 percent of the funding while the rest will be supplied by public investment and bank loans (2007). The refurbishment of aged buildings nationwide has increased to $6.3 billion in 2010 from $3.3 billion in 2009. [23] Another avenue for restoration in light of the new energy subsidy reform is to make housing more energy efficient in terms of heating. In addition, Iran’s geographical position over a seismic belt necessitates the reinforcement and renovation of housing. This is possible only through a boom in real-estate development and foreign investment. The plan is to provide a number of 1.8 million loans over a period of 6 years (2014–2020) ranging between $7,500 and $18,700 each. [24]

Real estate investment

The housing sector plays an important role in the economy of Iran; it has links with 130 economic sectors, contributes to more than 20 percent of fixed capital formation each year, constitutes 25 percent of the balance of loans in the banking sector, 33 percent of household expenses are housing expenses, and the housing sector contributes around 12 percent of employment to the economy. [24]

In terms of investment, the domestic rival markets of real estate market are gold, car and the Iranian bourse. Construction is one of the most important sectors in Iran accounting for 20–50% of the total private investment. One of the prime investment targets of well off Iranians as tangible. In Iran, only government employees pay their fair share of income taxes and no one pays a capital gains tax, which has allowed the rich to "squirrel away" their speculative real estate gains abroad. Prices for imported goods have increased somewhat along with global inflation but prices of non-tradables have increased at a much faster rate (with Tehran's real estate prices increasing by about 1,500–2,000% [sic] over the last 10 years), resulting in a highly overvalued currency and damaging Iran's competitiveness. [25]

Mortgage financing

As of 2016, main mortgage lenders in Iran are: [22]

Banks
Charities

Facts & figures

Profile of the Macroeconomics and the Housing Sector in Iran
Source: Ministry of Housing & Urban Development [13] (2006–2007)
No. of Household17.5 million
Housing stock15.97 million units
Amount of investment in the

housing of the whole country

21 billion dollars
Housing share of total capital formation25–35%
Housing share of GDP5.6%
Investment return30%
Housing share of total employment13%
Average annual demand for housing for the next 5 years1.2 million units
Production of housing838,000 units
Housing production per 1000 person1.2 units

Housing

Industry

Iranian contractors have been awarded several foreign tender contracts in different fields of construction of dams, bridges, roads, buildings railroads, power generation, and gas, oil and petrochemical industries. The availability of local raw materials, rich mineral reserves, experienced manpower have all collectively played crucial role in winning the international bids. [28]

Government

Karun-3 dam. Iran is among the world's largest dam builders. Karun-3 Dam.JPG
Karun-3 dam. Iran is among the world's largest dam builders.

Construction materials

Part of the material is supplied by traditional markets such as the Tehran-based grand markets of iron and cement.

Problems

Latest development

Opportunities for foreign companies

Thousands of foreign firms, mainly Chinese or European, have established agents in Iran or partnerships with domestic manufacturers, both investing directly in the housing market and targeting other Persian Gulf markets.

The Iran construction market is potentially ripe for the import of construction material to accommodate local demands.

According to the statistics presented by the Iran Imports Book, which is published by the Islamic Republic of Iran Customs Office, [40] Iran’s major imported items in 2003 included: [6]

Other imported items are: glass, timber flooring, lighting, paint, electrical and electronic fittings and accessories, lock, key hardware and aluminum for façade design.

Industry standards

Manufacturers and suppliers are required to have ISO 9000 certification in order to export to Iran. European Union standards (EN, BSI, DIN, ANFOR, UNI, NNI, ON, IBN, IPQ, DS, NSF, SEE, SIS, NSAI, ELOT), North America National standards (ANSI, ASTM, AGI, API), Japan National Standard (JIS) and International Standards (ISO, CODEX, ITU, IEC) are also accepted in order to export to Iran.

Further information is available from the Institute of Standards and Industrial Research of Iran.

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Iran</span>

Iran is a mixed economy with a large public sector. Some 60% of Iran's economy is centrally planned. Iran's economy is characterized by its hydrocarbon, agricultural, and service sectors, in addition to manufacturing and financial services, with over 40 industries directly involved in the Tehran Stock Exchange. With 10% of the world's proven oil reserves and 15% of its gas reserves, Iran is considered an "energy superpower".

<span class="mw-page-title-main">Communications in Iran</span>

Iran's telecommunications industry is almost entirely state-owned, dominated by the Telecommunication Company of Iran (TCI). Fixed-line penetration in 2004 was relatively well-developed by regional standards, standing at 22 lines per 100 people, higher than Egypt with 14 and Saudi Arabia with 15, although behind the UAE with 27. Iran had more than 1 mobile phone per inhabitant by 2012.

<span class="mw-page-title-main">Transport in Iran</span>

Iran has a long paved road system linking most of its towns and all of its cities. In 2011 the country had 173,000 kilometres (107,000 mi) of roads, of which 73% were paved. In 2008 there were nearly 100 passenger cars for every 1,000 inhabitants.

<span class="mw-page-title-main">Automotive industry in Iran</span>

Iran’s automotive industry is the third most active industry of the country, after its oil and gas industry, accounting for 10% of Iran's GDP and 4% of the workforce.

<span class="mw-page-title-main">Tehran Stock Exchange</span> Iranian stock exchange

The Tehran Stock Exchange (TSE) is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of October 2024, 663 companies with a combined market capitalization of US$ 94 billion were listed on TSE. TSE, which is a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of the world's best performing stock exchanges in the years 2002 through 2013. TSE is an emerging or "frontier" market.

<span class="mw-page-title-main">National Petrochemical Company</span>

The National Petrochemical Company (NPC), a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NPC began its activities by operating a small fertilizer plant in Shiraz.

<span class="mw-page-title-main">Agriculture in Iran</span>

Roughly one-third of Iran's total surface area is suitable for farmland, but because of poor soil and a lack of adequate water distribution in many areas, most of it is not under cultivation. Only 12% of the total land area is under cultivation but less than one-third of the cultivated area is irrigated; the rest is devoted to dryland farming. Some 92 percent of agricultural products depend on water. The western and northwestern portions of the country have the most fertile soils. Iran's food security index stands at around 96 percent.

<span class="mw-page-title-main">Mining in Iran</span>

Mining in Iran is still under development, yet the country is one of the most important mineral producers in the world, ranked among 15 major mineral-rich countries, holding some 68 types of minerals, 37 billion tonnes of proven reserves and more than 57 billion tonnes of potential reserves worth $770 billion in 2014. Mineral production contributes only 0.6 percent to the country's GDP. Add other mining-related industries and this figure increases to just four percent (2005). Many factors have contributed to this, namely lack of suitable infrastructure, legal barriers, exploration difficulties, and government control.

According to the Fourth Five-Year Economic Development Plan (2005–2010), the Privatization Organization of Iran affiliated with the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange. The privatization effort is primarily backed by reformist members of the Iranian government and society who hope that privatization can bring about economic and social change.

<span class="mw-page-title-main">Energy in Iran</span>

Iran possesses significant energy reserves, holding the position of the world's third-largest in proved oil reserves and the second-largest in natural gas reserves as of 2021. At the conclusion of the same year, Iran's share comprised 24% of the oil reserves in the Middle East and 12% of the worldwide total.

<span class="mw-page-title-main">Foreign direct investment in Iran</span> Investment in Iran

Foreign direct investment in Iran (FDI) has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global competitiveness of 142 countries. In 2010, Iran ranked sixth globally in attracting foreign investments.

<span class="mw-page-title-main">Iran–Turkmenistan relations</span> Bilateral relations

Iran and Turkmenistan share a common border of more than 1000 km. Since Turkmenistan's independence from the Soviet Union in 1991, the two countries have enjoyed good relations and have cooperated in economic, transportation, infrastructure development, and energy sectors. The two nations have strong historic ties.

<span class="mw-page-title-main">Banking and insurance in Iran</span>

Following the Iranian Revolution, Iran's banking system was transformed to be run on an Islamic interest-free basis. As of 2010 there were seven large government-run commercial banks. As of March 2014, Iran's banking assets made up over a third of the estimated total of Islamic banking assets globally. They totaled 17,344 trillion rials, or US$523 billion at the free market exchange rate, using central bank data, according to Reuters.

Water supply and sanitation in Iran has witnessed some important improvements, especially in terms of increased access to urban water supply, while important challenges remain, particularly concerning sanitation and service provision in rural areas. Institutionally, the Ministry of Energy is in charge of policy and provincial companies are in charge of service provision.

<span class="mw-page-title-main">Economic history of Iran</span>

Prior to 1979, Iran's economic development was rapid. Traditionally an agrarian society, by the 1970s the country had undergone significant industrialization and economic modernization. This pace of growth had slowed dramatically by 1978 as capital flight reached $30 to $40 billion 1980 US dollars just before the revolution.

<span class="mw-page-title-main">Subsidies in Iran</span> Government finance to reduce prices in Iran

The economy of Iran includes a lot of subsidies. Food items, such as flour and cooking oil, are subsidized, along with fuels such as gasoline. However cutting subsidies can cause civil unrest.

<span class="mw-page-title-main">Industry of Iran</span>

According to a report by The Economist, Iran has been ranked 39th for producing $23 billion of industrial products in 2008. From 2008 to 2009 Iran has leaped to 28th place from 69th place in annual industrial production growth rate.

<span class="mw-page-title-main">Petroleum industry in Iran</span> Overview of the petroleum industry of Iran

Iran is an energy superpower and the petroleum industry in Iran plays an important part in it. In 2004, Iran produced 5.1 percent of the world's total crude oil, which generated revenues of US$25 billion to US$30 billion and was the country's primary source of foreign currency. At 2006 levels of production, oil proceeds represented about 18.7% of gross domestic product (GDP). However, the importance of the hydrocarbon sector to Iran's economy has been far greater. The oil and gas industry has been the engine of economic growth, directly affecting public development projects, the government's annual budget, and most foreign exchange sources.

Iranian National Housing is a government program for support and development in Iranian cities of millions of housing units through 400 million toman loans mediated by state Minister of Roads and Urban Development provided through banks. It succeeded various Mehr Housing Projects. It started in 2018.

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