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Iran FaraBourse

Iran FaraBourse. Certificate of Mortgage Right. MASKAN BANK. 06 May 2012. 1. Introduction. The life of Iran Capital Market could be divided into four periods: 1) 1967-1978: Since the beginning of TSE activity until  revolution

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Iran FaraBourse

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  1. Iran FaraBourse Certificate of Mortgage Right MASKAN BANK 06 May 2012

  2. 1. Introduction The life of Iran Capital Market could be divided into four periods: 1) 1967-1978: Since the beginning of TSE activity until  revolution The number of companies increased to 105 (22 private banks, 2 insurance companies, and 81 industrial corporations). Most of this development activity was due to the ratification of ownership development of manufacturing units' stocks and tax exemption for the listed companies' laws. 2) 1979-1988: Since revolution until the end of war In the second period of TSE activities, two important events i.e. the Islamic revolution and war invasion were reduced exchange activities severely. The exiting number of listed companies decreased to 55 companies.

  3. Cont… 3) 1989-2005: Since the end of war until ratification of new Securities Market Law In this period, TSE was taken into account as one of the most important mechanisms for national economy optimization in order to facilitate the contribution of the private sector in the productive activities through transferring some of the state duties to the private sector. 4) 2005-Now: Since the ratification of the new Law until now In this period due to changes in the structure of the capital market and changes in regulatory and trading systems, the market growth in all fields easily can be seen.

  4. Cont… • Under the new Act, the Securities & Exchange High Council(Council) and the Securities and Exchange Organization(SEO) was introduced and created as regulators of Iran capital market • The Council is the highest official executive organ of the securities market, is responsible for setting the macro policies of the market. • The Securities and Exchange Organization (SEO) as second highest official executive organ, is responsible to protect the rights of investors, to organize, operate and develop a transparent, just and efficient securities market, and to supervise a proper execution of the Securities Law.

  5. Regulatory Framework of Iran Capital Market

  6. Establishment of Iran FaraBourse • Based on Paragraph (8) Article 1, and Article 28 of the Securities Market Law, and after obtaining permission from the Securities and Exchange High Council, Iran FaraBourse was established in November 2008. • Iran FaraBourse officially began its activities in the second half of the Iranian calendar year (28 September 2009). During the first 6 months, only four companies were listed and today, after 2 and a half years, the market has evolved into an exciting and growing marketplace where individual and institutional investors trade securities of over 100 companies with the market capital of US$27billion.

  7. FaraBourse Status

  8. FaraBourse Market Structure Iran FaraBourse First Market Second Market Block Trading Market Basic Market New Financial Instrument Market Registered Capital ≥ $815,660 Registered Capital ≥ $81,566 Amount ≥ $8 Million Free Float ≥ 10% Free Float ≥ 5% Due ≥1 Year Equity/Asset ≥ 15% Life ≥ 1 Years Market Maker ≥ 1 Life ≥ 2 Years

  9. First Market Cont… Second Market Stock Market Third Market Basic Market FaraBourse Markets Certificate of Mortgage Right Islamic Bond New Financial Instruments Market Debt Market Sukuk Bank Certificates

  10. Maskan Bank • Maskan Bank is a specialized bank in housing and construction sector. The history of the Maskan Bank dates back to the year 1938, when Iran Rahni Bank was established to support the construction of new housing in urban areas. Iran Rahni Bank was established through a joint initiative of the Ministry of Economic Affairs and Finance and Bank Meli Iran. Primary aimed at financing Iran’s housing and construction sector, it began offering real estate secured housing related loans, in order to facilitate the purchase, construction, and repair of housing units. • Expanding its filed of activity, Bank Rahni was embarked directly on construction operation in 1944, and has accomplished numerous large-scale construction projects ever after.

  11. Cont… • On June 7, 1979 Maskan Bank, classified as state-owned, was established through merger of Bank Rahni Iran, Bank Sakhteman (Building & Construction Bank), Iranian Banks Construction Investment Company, and other savings and mortgage associations around the country. • The registered capital of the Bank is now $1.7 billion, and the network comprises of 1,214 branches. • To further support the monetary section of the country, Maskan Bank included all available commercial banking services on its filed of activities. • The Bank is the unique financial arm of Iranian government in execution of Mehr Housing Scheme. This scheme is designed in 2007 to provide the majority of Iranian people with the opportunity of becoming housing owner. The process of granting facilities to this scheme is accelerated during recent years.

  12. Maskan Bank Status

  13. Privileged Investment Deposit Account • Maskan Bank as the only specialized bank in the housing sector, in achieving its goal of providing housing for various sector of society, especially low-income communities, has designed a "Privileged Investment Deposit Account". • Depositors in this account, in addition to receiving a reasonable profit, may also benefit from certificates of mortgage facilities. These certificates give depositor the advantage of applying for a house loan without having to wait long time.

  14. Cont… • Since these certificates can be conveyed to others, an informal market has been created to exchange these certificates in recent years. • Expansion of the informal market, showed the necessity of organizing transactions of the certificates more than ever before. • The Maskan Bank as a custodian of the housing market in the country, has put on its agenda creating a transparent and efficient market for transactions of these certificates. • The Bank has recognized that the best way to do this is to convey the transactions from informal markets to an official OTC market. • The instruments has examined and confirmed by the Sharia Committee in SEO.

  15. the Privileged Account Conditions • This account is in the form of a short-term investments deposit account. • The Bank defined three types for this account; Individuals (code;8726), legal entities (code;8728), and certain individuals (code;8727). • Legal entities for its employees or others and certain individuals with charity aims in order to enjoy the certificates need to have contract with the Bank. Their minimum deposit amount should not be less than 270 MIRR ($22,000) in any time during the term of contract. The Bank would separately calculate and allocate the certificates to these accounts. The allocation is usually based on 30 to 45 percent of the average account balance during the year.

  16. Cont… • For individuals, the initial amount to open the account and also the minimum amount during at least 6 months, is 50,000 IRR ($40). The depositor can withdraw or deposit money in this account frequently, provided that the minimum amount hold. • Opening more than one account by a depositor in different branches is possible. • The profit calculations are performed at the end of each month and will be paid on the first day of following month. • The Bank Obligations towards individuals depositors in this account is only to pay the profit equivalent to the short-term investments interest rate.

  17. The Allocation Process of Certificates • Allocation of the certificates is possible only to a limited number of accounts. Each year, based on the status of the resources, the Bank determine how much percentage should be applied to the Privileged accounts balance. It is between 15 and 45 percent. • The allocation of certificates will be done according to the amounts and terms of the deposit accounts and will be based on pointing system. To be considered into the system, the bases is completion of 6 months of opening the account or the last allocation. Allocation of certificates to an account with this method is possible frequently. • The certificates are valid for a period of two years. After the validity period, the Bank does not have any commitment to the holder. The first series of certificates issued on April 04, 2006. • Allocation of certificates to accounts are based on the following table.

  18. The Allocation System

  19. The Mortgage • The depositors who receive certificates have the right to apply for the loan to build or buy a housing unit or to sell the certificates. • Youth housing deposit account can be used along with the certificates to get the loan in order to buy or build a house. • The loan Interest rate would be 12 and 13 percent, if the certificates are used for buying or building a house, respectively. • The loan amount for buying a house that the issuance date of building permit is less than 12 years, is US$16,313. The amount is US$8,156 if the permit older than 12 years and maximum 20 years. • Since each certificate bears 408 USD Loan, if someone is willing to buy an apartment without holding any deposit in Maskan Bank, easily can buy 40 certificates from the market and apply for the maximum loan amount.

  20. Cont… • Maximum repayment term is determined as follow: • Maximum loan payable to a person on a house is US$16,313.

  21. Trading the Certificates • Each month, Technology Department of Maskan Bank send an electronic file consists of list of the new certificates holders to the CSDI through a secured telecommunication line. The file include the profile of accounts’ holders along with the number of allocated certificates. • CSDI first check the profiles with “Office of Civil Registration” and “Companies Registration Office”. For individuals; First name, Family name, Father name, Date of birth, Place of birth, Place of issue, ID number, ID serial number, National number, and Post code. For legal entities; Name of the firm, Registration number, registration place, Postal Address, and Fixed Telephone Number. • Then, CSDI create the trading symbol in trading system and data are recorded under the trading symbol. The trading symbol include the word “Loan” plus the month and the last two digits of the year (As an example: LoanMay12).

  22. Cont… • At the next stage, the hard copy of certificates is published by the CSDI, and convey to the bank. The bank distributes the certificates through its branches throughout the country to depositors. • Now certifications are ready to trade via Iran FaraBourse New Financial Instruments Board. • The trading procedure is the same as trading a stock or a bond. • The first trading day of the first symbol, the price fluctuation limits were not applied. From then onwards, the limits applied. • Since the certificates are valid for two years, when they are approached to expiry date, the market price should approach to zero. Thus, they should be separately traded in different trading symbols. Following this rule, every month Iran FaraBourse open a new symbol.

  23. Cont… • In order to open a new symbol, the last closing price of the latest symbol is applied and fluctuation limits is applied. • In the post session any changes will be send to the Technology Dep. Of the Bank through Secured line. The data will be record on the Bank systems. Similarly, the Bank would send any changes in the certificates status to the CSDI. In case of applying for the loan, CSDI will inactive the certificates in the trading system.

  24. Cont…

  25. Market Status of Certificates

  26. Maskan Bank FaraBourse Thank you Q&A

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