The strenuous efforts exerted to handle the housing crisis were quickly rendered useless when the ratified 2013 general budget did away with the allocations for the housing fund, which was to grant loans for those wishing to build new homes.
The Iraqi parliament ratified the 2013 general budget on March 7 after a heated debate among involved parties regarding the share allotted to the semi-autonomous Kurdistan region. The budget did not include any housing allocations, which were held back until an increase in oil revenues is seen.
The housing fund is set out by the Ministry of Construction and Housing. The biggest real-estate funding body in Iraq, with a capital of one billion Iraqi dinars ($900 million), the housing fund was established specifically to solve the housing crisis.
The fund grants zero-interest loans in monthly payments with a ceiling of $30,000 for those wishing to build a private home in the Iraqi capital. Should the construction take place in other provinces, the loan limit drops to $25,000. The 2013 budget stipulated that allocations for this fund would come from the surplus in oil revenues, instead of from fixed budget lines.
This surplus, however, is not expected to be reached until the middle of the next fiscal year, which means that the fund will not receive any money in the coming months.
Director-general of the fund Burhanuddin Bassam affirmed that the fund would not accept new loan applications from any of Iraq’s provinces. He stressed that the available money could only cover the payments due to applicants who had already registered.
“The fund’s liquidity is insufficient to carry on with the process of granting loans for more than a few days. The fund’s work may cease within a month’s time. Attributing this year’s allocations to a surplus in oil revenues and not including them in fixed lines implies that work will be halted until the surplus is reached,” said Bassam.
Bassam called on governmental bodies that were granted significant allocations to donate some of their money to the fund, which directly helps Iraqis who are struggling with the housing crisis.
For years now, Iraq has been undergoing a harrowing housing crisis, bringing with it skyrocketing prices in real estate and rentals.
“If housing loans come to a halt, a significant number of Iraqis would be deprived of suitable homes to live in,” added Bassam.
While the Ministry of Construction and Housing stressed that Bassam was shocked when he learned that the 2013 budget does not include housing allocations, sources within the ministry said that Housing Minister Mohammed al-Daraji has asked Prime Minister Nouri al-Maliki to be relieved of his duties in protest of excluding the fund’s allocations.
“The loans granted by the fund are under threat of being terminated because the necessary allocations were not included in the budget and depend on the a revenue surplus. The available amounts in the fund are 50 billion Iraqi dinars ($40 million). More than 11,000 Iraqis are waiting for the loans to be disbursed; however, these loans alone will cost around 342 billion Iraqi dinars [$300 million],” said al-Daraji.
“The use of the budget’s financial surplus to support the housing fund threatens to completely halt its operations,” he continued, adding, “If a financial surplus is secured, it will be taken into account after June. Due to administrative procedures, it will not be allocated to the fund before November.”
In order to find a solution to this crisis, the ministry asked the government to advance $300 million to the housing fund in order to cover the 2013 credit plan.
Regarding the distribution of residential units, the ministry says that priority will be given to widows, orphans and the disabled. Moreover, they will benefit from a disbursement period that has doubled from 25 to 50 years, until the ministry comes up with a solution to the budget problem or obtains the necessary advance from the government.
The Iraqi parliamentary Finance Committee said that it has asked the Finance Ministry to allocate the fund sums from the 2012 budget and provide it with an advance in order to guarantee that its plans are implemented.
Committee member Amine Hadi Abbas said that “the committee has asked the Finance Ministry to disburse the fund’s appropriations from 2012, and advance additional sums to help it continue to function normally.”
The fund is said to have granted $340 million in loans for those wishing to build residential units in 2012. Yet sources within the Iraqi Investment Authority said that the government credit plan hinders efforts to bring real-estate investment to the country. These sources said that the housing loans limit the demand for residential units built by foreign investors, units that are sold at market value and paid for in installments.
So far, the Iraqi government has failed in marketing units in the Besmaya housing project in Baghdad, constructed by the South Korean company Hanwha.
A clear slump has been noted in the Baghdad real-estate market since the start of the political crisis that has erupted in the country. This comes against the backdrop of protests that erupted in Sunni areas against the Maliki government.
The demand for residential units in Baghdad grew significantly after 2003, due to increases in income and the opening of the markets. Real-estate agents, however, say that the demand for homes in Baghdad has sharply declined over the past two months due to the repercussions of protests in Anbar, which is one of the most important Sunni strongholds in Iraq.
Omar al-Shaher is a contributor to Al-Monitor’s Iraq Pulse. His writing has appeared in a wide range of publications including France’s LeMonde, the Iraqi Alesbuyia magazine, Egypt’s Al-Ahaly and the Elaph website.