The construction industry is directly connected to 6 infrastructural industries and its flourishing causes other industries growth. As a rich and developing country of the region, Iran has experienced huge investments in this industry, which is composed by private residential constructions and also infrastructural facilities and structures. This growing trend is continuing and considering comprehensive policies and Iran development plan, its requirement will continue with an increasing trend.
Construction sector composes about 9% of Iran GDP. In studying construction and real estate sectors’ role in GDP, it must be noted that two sides regarding GDP usually influence these sectors. The first, is construction sector’s value added, which composes 6% to 9% of GDP and the mentioned percentage is only related to constructing. The second is the real estate services, which composes 11% to 13% of GDP. Services sector’s share of GDP is about 50%, which 11% to 13% is contributed by real estate services. Totally, 16% to 21% of Iran value added economic capacity is provided by housing sector.
It is expected, Iran construction market continues its steady growth with a 6.1% compound growth value since 2016 to 2020. Since Iran has a population of 80 mn and considering the fact that 64% of aforementioned population is under 35 years old, Iran has the potential to turn into one of the main players in international construction market. It is predicted, Iran construction market total value reach to a 196 bn USD value by 2020.
In the year ended in March 2016, building floor area in all of Iran urban regions is an estimated 62- bn sqm that experienced a 14% drop in comparison to the year ended in March 2015. About 102,000 construction permits in Iran urban regions have been issued that it also experienced a 13% drop in comparison to the previous year. Since the year ended in March 2012, the number of issued construction permits in all urban regions has entered a downward trend, so that in the year ended in March 2016, quality of issued construction permits faced a 13% decrease.
Table 1 Issued construction permits and building areas according to issued permits
Figure 1 Building floor area estimation according to issued permits (mn sqm)
Figure 2 Issued constructional permits in urban regions (000)
Household’s distribution status based on housing ownership type
65% of Iran households dwell in owned houses, 25.2% are tenants. In addition, 9.1% occupied houses are free of charge and 0.7% occupied houses are in exchange for services.
Table 2 Household distribution percentage according to housing occupation type (%)
Figure 3 Urban households housing occupancy status in the year ended in March 2016 (%)
Households housing status according to utilized material
Major share of Iran households dwell in buildings constructed with brick and Steel girder materials. Quantity of households dwelling in buildings constructed with adobe, clay, and wood material is 2.2% of total Iran households and this section holds the lowest share.
Table 3 Households housing location distribution according to materials used in building construction (%)
Figure 4 Households housing location distribution according to main materials utilized in building construction
Private sector’s investment in urban regions new buildings
In the year ended in March 2016, private sector’s investment was about 23.71 bn USD in urban regions new buildings, which had experienced a 14% decrease in comparison to the year ended in March 2015.
Table 4 Private sector’s investment in urban regions new buildings (bn USD)
Source: CBI * Note: current prices are without land values
During the period since the year ended in March 2012 – 2015, private sector’s investment volume was increasing in construction, but it must be noted that each year it increased with a lesser inclination in comparison to the previous year. This decrease in investment growth finally reached – 14% in the year ended in March 2016. Private sector’s investment in urban regions new buildings nominal growth rate was lesser than inflation rate in the year ended in March 2014.
Figure 5 Comparison between inflation rate and private sector’s investment in urban regions’ new buildings
(nominal growth rate)
During the 4 recent years, private sector’s building construction projects just- started in urban regions has experienced a downtrend. During the recent years, the construction trend for residential buildings were also decreasing so that residential buildings share has decreased from 95% in the year ended in March 2012, into 90% in 2016.
Table 5 Specifications for just- started building construction projects by private sector in urban regions
Source: Statistical Center of Iran
Figure 6 Just- started building construction projects by private sector in urban regions
Source: Statistical Center of Iran
“Mehr” Housing Project and Social Housing Plan
Mehr housing project was among plans launched in Iran since 2005 because of the drastic increase in housing prices. The project launched in lining with market control and low- cost housing provision for society’s low income groups through providing free lands. At first, the project had planned to construct 4 mn residential housings, then, the quantity decreased to 2.3 mn. From the total number of 2.3 mn housings in the project, currently 1.92 mn has been finished from which 560,000 were constructed by mass constructors, 520,000 by housing cooperative companies, 850,000 by people (owners), and 270,000 were constructed in historical and worn out districts.
The Social Housing Plan is conducted by ministry of cooperatives, labor, and social welfare and ministry of roads and urban development in social housing plan; the organizing and determination of target groups is conducted by ministry of cooperatives, labor, and social welfare and ministry of roads and urban development shall provide the needed lands for construction. In this plan, the main operator and intendant are supporting institutions and organizations and measures have been taken to reduce the interference by government and ministry of roads and urban development to a minimum. In this regard, the responsibility for monitoring and evaluation of project progress has been granted to Islamic Revolution Housing Foundation and also work performance follow- up and coordination has been put on ministry of roads and urban development shoulders and also ministry of cooperatives, labor, and social welfare. In social housing plan, average housing space is 50 sqm and this space increases to 70 sqm for families with children. The fundamental difference between social housing plan and Mehr housing project is the applicant’s amount of contribution. In Mehr housing project, except for financial facilities, the rest of costs are paid by applicants while in social housing plan, the housings are priced by household’s income capacity and the applicant would be able to inhabit the provided housings with a maximum of 30% to 40% of his/her income share. It is noteworthy that residential housings in social housing plan are provided to applicants in rental format.
Bank facilities in housing section
According to central bank’s official data, in the year ended in 2016, more than 14.58 bn USD has been granted in form of loans in Housing section by banks.
Table 6 Loans extended to construction and housing sector (bn USD)
In the year ended in March 2016, 19.8% of total provided banking loans in housing was dedicated to buying houses, 20.1% was for working capital provision, and 19.8% was dedicated for housing construction.
Figure 7 Purposes for receiving facilities in housing and construction
Currently, most common planning and execution for construction in Iran is block joist and truss framework system. Iran has an over 30- years history and more than 90% of constructions has been conducted with a truss that is currently prohibited.
To sustain its economic development Iran requires construction materials of all kinds. These include cement, lime, plaster, asbestos (products), Glass, Steel, lumber, and metal and decorative stones.
Construction materials are referred briefly in related chapters to this book including: cement, metal etc.
Ceramics and Tiles
Table 7 Iran ceramics and tiles industry production and consuming (mn sq m)
Figure 8 Iran ceramics and tiles industry production and consumption (mn sq m)
Rebar and Steel Girder
Table 8 Rebar and Steel girder production (000 tons)
Source: Steel Iran
Doors and Windows
Doors & windows have the most attractive portion among the numerous fields of constructional activities in Iran, so have the most prosperity, as well. Just during the last decade in Iran, this industry has given up its traditional structure and expedite to the modernism. It is just a few years that utilization of standard, safe and insulator doors and windows has got mandatory and the users and consumers also are extremely enthusiastic in using these products. This new taste and necessity caused the manufacturers to change their production platform to manufacture new and updated products. At the same time the volume of export to Iran has found an unbelievable growing rate, so that at present time doors and windows have the highest rate of import in Iran, in comparison to the other products which are used in constructions and buildings.
Glass contains various categories such as flat Glass, multi pane glazing, float Glass, blocks Glass, and Glasses for internal design purposes.
Table 9 Glass export
In the year ended in March 2016, Glass export have been 84 mn USD and it weighed 394,000 tons. In comparison to the year ended in March 2015, has been experienced 16% decrease in value and 0.14% in weight. During March 2016 to January 2017, the Glass export value and weight were 81 mn USD and 33,000 tons.
Table 10 Glass export main destinations (mn USD)
Construction permits process
Dealing with construction permits there requires 15.0 procedures, takes 99.0 days and costs 1.7% of the warehouse value. (CBI official exchange rate in the end of Apr 2107 was 32,442 IRR)
Table 11 Summary of time, cost and procedures for dealing with construction permits
Source: Doing Business
Vision in 2025
According to Iran age pyramid, 10.5 mn couples (21 mn individuals) will reach to marriage age until 2025. Thus, the total required residential housings for the occurred marriages by 2025 are estimated to be 18 mn with a countrywide distribution. During the years before 2025, about 2.1 mn housings will be considered worn- out. Thus, required residential housings will be 5.8 mn for putting worn- out housings in consideration, by 2025. According to the latest data and by considering standards for housing and quantity of urban and rural households in Iran (by Iran Statistical center), shortage of residential housing are estimated to be 2 mn in accordance with international standards. About 28 mn residential housings must be constructed by vision of 2025 in Iran, which are 2.5 mn housings annually.
Iran’s construction industry is characterized by strong demand for housing, infrastructure development and modernization as well as industrial expansion. With recession started in Iran`s economy in recent years, housing has been affected too and with expected
growth of Iran`s economy, it is estimated that the housing industry will start to grow again.
Iran construction industry requirements in future years are such as: Transfer of technology, energy efficiency, sustainability, modern construction material and technology, and many others. These needs for modernization promise immense lucrative opportunities for new investors and companies. While the government continues to tackle the low- income housing shortage and infrastructure development projects, private investments are expected to turn to more lucrative markets such as high- rise offices, shopping malls, hotels, as well as hospitality and tourism related developments.
Mass construction and real estate group in capital market
The mass construction and real estate group almost holds a 1.2% share of Iran stock market with a 1,408 mn USD. The P/E ratio for this group is 12.14. The following diagram indicates mass construction and real estate group’s changes trend.
Figure 9 Mass construction and real estate group’s index
– Expert human resources
– Possessing 70 mn tons of cement production capacity as one of the main materials in the industry
– Abundance of raw materials and constructional material in Iran
– Land high price
– One of the main weaknesses in construction industry is domination of engineering view instead of economic and commercial views.
– Weakness in sales and provision of after- sales services, (which has experienced little to nothing growth in construction industry.)
– Low technology in constructing
– Not considering time schedule or principles and rules
– Housing market structure in Iran is based on traditional scope.
– Considering each 1 square meter of building area as scale, Iran human resource productivity is half of Turkey’s.
– Energy consumption for each 1 square meter construction in Iran is more than 4,000 kWh
– The value of annual maintenance services in Iran is 323 mn USD which is a good potential for engineering services entering the market.
– Tax discounts for buildings in which state’s standards are considered
– High quantity of young and in marriage age population in Iran
– High necessity to new and up to date construction technology
– People’s unfamiliarity with new technologies
– People’s acceptance of traditional construction methods
– Unprofessional execution of projects and applying not standardized construction material in buildings
– Low role of efficiency in building construction culture
– New technologies entrance and their utilization cultural trainings are not simultaneous.
– Bureaucracy of issuing constructional permits is high.