Can Fractional Ownership Pave the Way for Investment in the Construction Market?

In recent years, due to rising apartment prices alongside declining purchasing power among Iranians, pre-sale contracts for buildings have become increasingly popular. However, with the rise in pre-sale housing contracts, legal disputes related to them have also grown significantly.

According to a report by Tasnim News Agency, homeownership has always been a concern for individuals, especially the younger generation. The Iranian government has also made efforts to address this need by implementing initiatives such as Mehr Housing, the National Housing Movement, and housing loans, which have partially met the demands of society. However, these initiatives also require significant initial capital, which many individuals cannot afford.

Some experts in Iran believe that fractional ownership of housing not only boosts construction but also provides a secure path for preserving the limited assets of the public. Additionally, increased construction activity would shorten the path to homeownership for many applicants.

In recent years, with rising apartment prices and declining customer purchasing power, pre-sale contracts for buildings have gained significant traction. However, alongside the increase in pre-sale housing contracts, legal disputes related to them have also surged.

In many cases, individuals have sold semi-finished or even unbuilt apartments, and buyers have entered into contracts with them. Buyers, under the impression that they secured a good deal below market prices, later discovered that the same property had been sold to multiple people, construction was delayed for various reasons, and so on. As a result, the seller had deceived them. This is despite the fact that the Pre-Sale of Buildings Law was enacted in 2010. However, this law has failed to create a secure environment for long-term investment in the housing and construction market.

Construction Development Significantly Boosts the Country’s Economy

In this regard, Sayyed Taha Hussain Madani, head of the Smart Governance Think Tank, stated that the construction industry drives production in other sectors of the economy. He added: “Housing production directly facilitates the continuous activity of at least 350 other sectors and 162 indirect sectors, including workshops and factories—from steel, cement, bricks, gypsum, lime, and stone to interior design, furniture, household appliances, and other production sectors in the country.”

He continued: “Additionally, statistical studies show that sustained housing production and increased construction activity mean higher employment levels and a fight against unemployment in many societies. According to many economic experts, housing production and construction are anti-inflationary approaches, meaning that with continued mass construction, inflation in this sector can be controlled. Therefore, it can be said that our economy should move toward increasing housing construction.”

Idle Public Capital Can Boost Construction Activity

According to many Iranian economic experts, housing construction not only has economic benefits but also significantly impacts the success of the government’s macro-cultural and social policies. For example, implementing new population policies and supporting families will not be successful without providing affordable and sufficient housing for young people.

Therefore, it is better for the Iranian government to present a clear and reliable plan to organize the existing liquidity in society. Madani, in this regard, said: “For example, a large portion of the public’s assets and capital, which are currently idle in the car, housing, and gold markets, can be used to increase construction activity. In this way, individuals would not have to worry about losing their capital or its devaluation due to inflationary waves.”

According to this policy expert, housing production requires many prerequisites. For example, having appropriate laws to attract individual investment and increase housing construction is crucial. Unfortunately, the current pre-sale housing law does not function effectively and cannot be implemented in the pre-sale housing sector. Many legal experts have also pointed out numerous flaws in this law.

Madani criticized the spread of speculative activities and behaviors in society, adding: “Markets where investment does not benefit the collective should be limited through tax measures. Implementing laws such as capital gains tax can direct public investment toward sustainable and real benefits for the people.”

He pointed to the poor state of the housing construction market, stating: “Unfortunately, because housing construction and participation in its market require significant financial resources, a large portion of the public’s small assets are invested in the gold and dollar markets. This not only harms the country’s economy but also reduces construction activity.”

The Need to Direct Individual Capital Toward Secure and Long-Term Investment

Madani, referring to the significant number of car registrations in automakers’ sales plans, said: “In the recent Iran Khodro lottery, people deposited nearly 86 trillion tomans. Clearly, a large portion of this demand was not for car purchases but for profiting from the price difference between the market and the factory price. Interestingly, if these individuals had invested their money in construction, it would have been possible to build over 100,000 residential units.”

This policy expert added: “According to the recent statement by the Director General of the Automotive Office at the Ministry of Industry, Mine, and Trade, in the first half of March this year, automakers are expected to meet all car market demands without a lottery over the next year. However, the highest car production in recent years, even without current limitations, was 1.5 million units. Yet, in the recent Iran Khodro plan alone, nearly 2 million requests were registered, and this number may repeat. It remains to be seen whether this large number is within the production capacity of automakers, who have already made commitments. Looking at past statistics, this number seems unrealistic and unattainable.”

Can Fractional Housing Ownership Pave the Way for Investment in the Construction Market?

Madani stated that expanding and modernizing public transportation could reduce the demand for personal cars. He said: “The liquidity in the hands of the public, which is much larger than the 86 trillion tomans figure, can be directed toward the housing market and construction activity in a way that ensures profit for participants without worrying about losing their capital or returns.”

In conclusion, he noted that individuals can enter the housing market through fractional ownership: “Each person can participate in the construction industry by purchasing a share of under-construction homes, thereby strengthening this sector. Additionally, if the Iranian government can provide free land to the public, by collecting public capital and creating a reliable mechanism, a significant portion of the government’s construction-related obligations can be fulfilled. However, it must be noted that achieving this requires adherence to specific and reliable principles and mechanisms. Otherwise, entering this field will lead to consequences and problems far more complex and widespread than the frauds in the pre-sale sector.”