Construction to Iran

(Last updated: 26 Jul 2007)

Trends and opportunities

The market

In recent years, Iran's construction market has been thriving due to an increase in national and international investment to the extent that it is now the largest in the Middle East region.

The annual turnover in the construction industry amounts to US$38.4 billion. Statistics from March 2004 to March 2005 put the number of total Iranian households at 15.1 million and the total number of dwelling units at 13.5 million, signifying a demand for at least 5.1 million dwelling units. Every year there is a need for 750,000 additional units as young couples embark on married life.

At present, 2000 units are being built every day although this needs to increase to 2740 units. In addition, Iran’s geographical position over a seismic belt necessitates the reinforcement and renovation of housing in Iran. This is possible only through a boom in real-estate development and foreign investment.

Restoration of old buildings is one of the priorities for the Iran Government. Estimates show that about US$143 billion needs to be allocated in the next 10 years for restoration of 14,000 metres of critically decaying buildings. The government will earmark 11.5 per cent of the funding while the rest will be supplied by public investment and bank loans.

Opportunities

The Iran construction market is potentially ripe for the import of construction material to accommodate local demands.

According to the statistics presented by the Iran Imports Book, which is published by the Islamic Republic of Iran Customs Office, Iran’s major imported items include:

• iron and steel (iron slabs and steel, iron and steel bars, rolled iron and steel wares)
• pre-fabricated buildings
• elevator wares
• block and tackle
• road-building machinery
• digging and excavation machinery
• cranes
• hygenic products made of plastic and china
• stonewares
• plaster and cement

Other imported items are: glass, timber flooring, lighting, paint, electrical and electronic fittings and accessories, lock, key hardware and aluminium for façade design.

Competitive environment

The housing industry is one of the few segments of the Iranian economy where state capital shares as little as two per cent of the market, and the remaining 98 per cent is private sector investment. There is little red tape or hurdles and, as a result, through launching mass development projects, the use of new technologies and fast-pace project execution, a larger portion of the housing market is accessible. This is also true for new construction materials and technological advances. Thousands of foreign firms, mainly Chinese or European, have established agents in Iran or partnerships with domestic manufacturers, both investing directly in the housing market and targeting other Persian Gulf markets.

Tariffs, regulations and customs

Single-column tariff is based on the Customs Cooperation Council Nomenclature.

Customs duties and beneficiary taxes are levied on most imported goods. Duties are mainly ad valorem and assessed on a C&F value basis (Incoterms 1990).

Capital goods and raw materials imported for foreign investments may be exempted from normal duties; similarly medicines, wheat and other strategic goods are exempt from duties. However, most imports are subject not only to licensing fees and tariffs, but also to local taxes. 

Exchange control authority is vested in the Central Bank (Bank Markazi). All foreign exchange transactions must take place through the Central Bank or authorised banks.

Permitted items no longer require specific approval from the Ministry of Commerce. Only registration by the Ministry is required.

Customs authority contact details:

President of the Customs Administration of the Islamic Republic of Iran
Vali-e-Asr Avenue
PO Box 6369
Tehran 14155
Tel: (98 21) 8890 9215
Fax: (98 21) 8890 6291 

Industry standards

Manufacturers and suppliers are required to have ISO 9000 certification in order to export to Iran. European Union standards (EN, BSI, DIN, ANFOR, UNI, NNI, ON, IBN, IPQ, DS, NSF, SEE, SIS, NSAI, ELOT), North America National standards (ANSI, ASTM, AGI, API), Japan National Standard (JIS) and International Standards (ISO, CODEX, ITU, IEC) are also accepted in order to export to Iran.

Further information is available from the Institute of Standards & Industrial Research of Iran.

Marketing your products and services

Market entry

The main barrier to the supply of services is the regulation that prohibits the import of equipment and services if they can be sourced locally. An entry strategy to join with a local partner and/or direct presence in the market needs serious consideration. The problem is finding a qualified and professional partner, who for service providers, is a choice between private companies and recently privatised government entities.

It's extremely important to have a local presence in Iran to improve the chances of finding the right contacts in the Iranian hierarchy who facilitate the awarding of projects and purchases. Quite apart from 'lobbying' it is also the daily interaction with government bodies that often proves so important in capitalising on opportunities.

To date, business in Iran has had political overtones. In this regard, Australia has an advantage since it maintains a relative low profile/political image in the Middle East.

As is the case in most countries, doing business in Iran can be a time­ consuming and 'political' undertaking. Iran has its own peculiarities that differentiate it from similar markets, therefore an understanding of the complex market structure, networking and a strong presence in Iran are the critical success factors, beyond technical capability.

General marketing advice regarding business in Iran:

• Be flexible, adapt, but don’t conform
• Be patient, but not passive
• Be locally active
• Have finance available
• Be fair with profits
• Maintain a long-term commitment through times of profit and hardship
• Comply with the Iranian business customs
• Get to know the key people
• Choose a compatible local partner
• Your primary project is always your primary reference. if you win the project, you have more chance of winning future extensions/amendments
• The technical winner is not necessarily the final winner
• Business in Iran needs to be conducted in a ‘hands-on’ manner

Distribution channels

There are underground networks, with agents across the country, which hold monopoly over Iran’s construction materials market. Meanwhile part of the material is supplied by traditional markets such as the Tehran-based grand markets of iron and cement.

With e-commerce being used widely in Iran in recent years, an increasing number of local investors take interest in seeking agent licences from (foreign) manufacturers to import hi-tech equipment needed in the construction industry. Moreover, various institutions and associations engaged in construction are potentially another source of distribution of imported wares.

The importer or the exclusive agent of a certain product should identify the local market and take into consideration the ways for distribution of their merchandise before acquiring a licence (from a foreign company) as an agent.

Links and industry contacts

Construction-related resources

Iran Construction Information Centre - www.icic.gov.ir
Ministry of Road & Transportation - www.mrt.ir

Government, business and trade resources for Iran

Iran Trade Promotion Organization - www.tpo.ir
Ministry of Commerce - www.irtp.com

Trade events

Iran International Exhibitions Company - www.iranfair.com

3^rd International Exhibition of Building & Civil Engineering (CIBEX 2006) – www.expokish.com

Service providers

Allied Legal Services
Suite 7, #17 Kish St
Africa Expressway
Tehran 15188-14311 Iran
Tel: (98 21) 8877 1753
Fax: (98 21) 8877 1469
Email: allied@allied-legal-services.com

Atieh Associates Law Firm
1^st Floor, No14, 5th Alley
Ahmad Ghassir(Bucharest) Ave
Tehran 15137 Iran
Tel: (98 21) 8872 1112
Fax: (98 21) 8872 0077
Email: babak.namazi@atiehassociates.com

Atieh Bahar Consulting (Market Research and Due Diligence)
1^st Floor, No.14, 5th Alley
Ahmad Ghassir Ave
Tehran, Iran
Tel: (98 21) 8872 1112
Fax: (98 21) 8872 0077
Email: shahram@atiehbahar.com

Law Offices of Rastegar - www.rastegar.ca
34 Takhti Street Suite 3
Postal Code 14347 43754
Tehran, Iran
Tel: (9821) 8888 3050
Fax: (9821) 2287 2478
Email: mail@rastegar.ca

Mahallati Consulting Co
15, 2^nd  St. Miremad Ave
Tehran, Iran
Tel: (98 210 8874 1179
Fax: (98 21) 8874 2577
Email: Majid@Mahallati.com