Stagflation and Taxation
Construction Industry Stakeholders Warn Builders Are Leaving Iran’s Housing Market
- Construction industry stakeholders warned that continued stagflation will push housing builders out of business.
- Building permits and double taxation were identified as among the main bottlenecks in the industry.
- Apartment sales inflation is around 50 percent, and material supply is facing problems and price disparities.
- Life and future housing insurance was presented as a way to direct buyers toward housing.
- If the current trend continues, housing supply will be far lower than demand.
Stakeholders active in financing, insurance, construction, architecture and business development have warned about the financial, tax and executive challenges facing Iran’s construction industry, stressing that continued stagflation in the housing market will push many builders out of business and drive supply far below demand.
Financial and Executive Challenges in the Construction Industry
Mohammad Sadegh Mirzaei, head of financing at Zech Company, pointed to the financial and executive challenges facing the industry and said that prevailing approaches to the industry and new financing markets have not brought about a serious transformation in construction and have in practice failed to create any opening in this area. He believes banks, capital market institutions and even insurance companies should become more involved in this sector.
An Experience in Housing Insurance
Sajjad Mojarrad, business development advisor at Torbat Pak Holding, then referred to an experience in the insurance sector, saying that a fund for housing has been established and life and future housing insurance has been offered; in this way, a person who buys life insurance is in fact directed toward housing.
Building Permits: The Main Bottleneck
Payam Rahmani, a developer with Rahmani Construction Group, identified builders’ biggest challenge as their dealings with municipalities and the issuance of permits, stressing that this process becomes more time-consuming and complicated every year.
Double Taxation on Builders
Hassan Nazarzadeh Dabbagh, secretary of the Iranian LSF Association, criticised the heavy tax burden on builders, saying: “Builders pay taxes and also pay value added tax at the municipality, but Article 77 tax and an additional levy are collected from them at rates far higher than those applied to other businesses.” According to him, builders are not opposed to paying taxes, but object to the way they are collected.
New Technologies and Inconsistent Directives
Mohammad Ghaffari, an architect, pointed to the lack of uptake of new technologies in construction and said the prevailing approach in the country has caused the issue to become largely lost in the directives that are issued.
Material Supply and 50 Percent Inflation
Hossein Samiei, a developer, referring to the impact of incidents such as missile strikes on factories on material supply, announced that they are facing problems in supplying materials and that in some cases they have encountered 100 percent differences in the prices of various materials. According to him, current inflation in apartment sales is around 50 percent.
Warning About Builders Leaving the Market
Mohammad Hossein Damradi, from Arta Memar Gharb Company, warned in conclusion that many housing producers have been pushed out of business, because the product they were producing could not be sold amid severe inflation and market disorder, and a heavy recession dominated the housing market. According to him, if this stagflation in housing continues, a large portion of builders will be pushed out of business and supply will in practice be far lower than demand.
