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24 April 2022

The Possibility of Sale of Real Estate through Commodity Exchange for Natural Persons

 The Possibility of Sale of Real Estate through Commodity Exchange for Natural Persons

On 17 April 2022, the head of the Economic Studies Department of the Iran Commodity Exchange, Moein Mohammadipour, stated that based on the rules of the Commodity Exchange, natural and legal persons are able to offer real estate for sale in the exchange market.

Mr. Mohammadipour announced that the mechanisms and model contracts for the sale of real estate through the Commodity Exchange have been implemented since last year, and some entities such as Ministry of Roads and Urban Development, Eghtesad Novin Bank, and the Ministry of Defense have also employed these mechanisms in order to sell their properties through exchange market.

So far, this method has been mainly used by governmental entities as an alternative for selling their real properties by auction. However, the idea of not restricting natural persons and private entities from playing their role in the real estate Commodity Exchange, gradually became famous. In fact, not only allowing such persons entering the market help low income persons to buy properties, but also results in cultivating a more competitive sphere and a well-developed housing market. Fortunately, since March 2020, private companies have also resorted to this method of sale and hopefully this mechanism would be welcomed more by the private sector.

As stated by university professor, Kamran Nadri: “Since the Commodity Exchange is like a glass room, it is the best place for offering real estate, since corruption and illegal surplus will not happen”. Thus, the market value for properties would be clearer to the extent that by considering them in one region, the value in other similar regions could easily be evaluated and, the housing market would become even more transparent.

For the time being, real estate is mostly being pre-sold and the considerations are also paid in several milestones, a helpful method for people with low income; however, there is still no guarantee to make sure that the said realties would be delivered in a timely manner. Conversely, in this new mechanism, the buyers would buy “Sokuk Salaf” which would be equal to “a certain unit of the realty in square meters”. Therefore, the more “Salaf” (i.e. share) people buy, the more units of the real estate they own. Besides, as the price of property rises, “Sokuk Salafs” would be more valuable. If the buyers change their minds or be in desperate need of money, they will always have the option to sell their shares in a secondary market. Accordingly, by using this method, one would be able to buy a square meter of a realty even with low fund and there would be no need for full payment. Also, this transaction is fully secured since the Commodity Exchange guarantees the timely delivery of the realty based on its prospectus.

Once a property is introduced, and the required documents are submitted to the exchange for auction, the offer would be evaluated and reviewed and following the revision of the documents, the property would be placed on the Commodity Exchange Board in order for the auction process to be initiated.

In contrast with sale by auction, using this new method would create a more competitive and transparent environment in real estate industry which is one of the main goals of this new method.

However, as this facility gets more developed and becomes more popular amongst buyers, some restrictions might be placed in the near future, depending on the market power.

 

 

On 17 April 2022, the head of the Economic Studies Department of the Iran Commodity Exchange, Moein Mohammadipour, stated that based on the rules of the Commodity Exchange, natural and legal persons are able to offer real estate for sale in the exchange market.

Mr. Mohammadipour announced that the mechanisms and model contracts for the sale of real estate through the Commodity Exchange have been implemented since last year, and some entities such as Ministry of Roads and Urban Development, Eghtesad Novin Bank, and the Ministry of Defense have also employed these mechanisms in order to sell their properties through exchange market.