TEHRAN- The deputy transport and urban development minister said that issuance of salaf bonds for the presales of housing units is a reliable and viable way of investment making for the builders and buyers of houses.

Mahmoud Mahmoudzadeh mentioned the approach and objectives of issuing the mentioned salaf bonds, which are due to be unveiled soon by Iran Mercantile Exchange (IME), and said these bonds are aimed at helping the house applicants and housebuilders.

Last week, the IME deputy for economic studies announced that the exchange plans to presell housing units through standard salaf bonds in near future.

“We will soon see the issuance of standard housing salaf bonds in the capital market to help financing in the housing sector and construction of new housing units in the country,” Javad Fallah said.

A standard parallel salaf is an Islamic contract similar to futures, with the difference being that the contract’s total price is paid in advance. 

According to the official, IME is following two major approaches for implementing the mentioned plan, one is offering bonds related to the already existing housing units like assets owned by the government and state banks and the other is preselling the units that are going to be constructed in the future.

Outlining the procedure, the official said the total value of a housing unit or a construction project will be securitized and converted into marketable bonds which will be offered through salaf contracts.

The official further explained that each salaf bond would be backed by one square meter of a housing unit, which means each bond would be offered at the price of one square meter of a particular housing unit at the time of offer.

Fallah underlined the implementation of this method as a way to develop reliable investment in the housing sector and added: "In this way, micro-capitals will lead to the increase of construction and supply of housing units and will consequently curb the rampant rise in housing prices.”

Back in July, the High Council of Securities and Exchange announced the approval of a decision for establishing a specialized exchange for real estate trade in the country.

It will be the fifth exchange operating in the country after the Tehran Stock Exchange, the junior equity market Iran Fara Bourse, Iran Energy Exchange, and the IME.

MA/MA