The Mashhad Municipality drafted a comprehensive construction investment incentives bill for the first time, which has been recently approved by the members of the Islamic City Council of Mashhad. The primary objective of this bill is to foster balanced development in Mashhad by attracting construction investors through various financial incentives. A discussion panel focused on “Comprehensive Construction Investment Incentives” was held at Khorasannews, attended by two members of the Islamic City Council of Mashhad and a private sector expert. This roundtable aimed to clarify the details and review the objectives of the bill. Participants included Mr. Ahmad Nowruzi, Chairman of the Economic, Investment and Partnerships Commission of the Islamic City Council of Mashhad; Dr. Mohammadhadi Mahdinia, Chairman of the Construction and Urban Planning Commission of the Islamic City Council of Mashhad; and Mr. Reza Ahadian, Chairman of Khorasan Razavi Development, Investment and Construction Association, who discussed and shared their opinions about this bill.
The role of Mashhad Municipality in guiding investments
At the outset of this meeting, Mr. Ahmad Nowruzi highlighted the uneven distribution of private investment resources in the city and characterized the essence of this bill as a form of urban diplomacy. He stated, “We have responsibilities to those investing in Mashhad, and we believe that these funds should be allocated to meet the needs of society. It is preferable to avoid making these investments in oversaturated areas. I know that these funds may seem personal at first glance; however, they are actually our national resources that transform into projects. Conversely, various parts of the city face shortages and demands in sectors like health, culture, sports, and even commerce. This policy aims to guide investments in alignment with the needs of urban society. The Mashhad Municipality has outlined incentives for individuals to develop multi-purpose spaces in areas where they are essential, promoting enhanced efficiency.”
Special privileges for investors
This bill has been prepared following comprehensive scientific studies, analysis of the experiences of municipal managers, and numerous meetings. If investors engage in construction activities beyond the designated commercial and residential fields within the city, the Mashhad Municipality will evaluate concessions for them. The concessions primarily involve lowering municipal fees, and in some cases, eliminating them entirely during the construction process, which can be a source of solace for investors. A member of the Islamic City Council of Mashhad highlighted that executing certain projects in specific areas of the city or with particular functions cannot be economically justified. He added, “For instance, sports projects lacked economic justification in the past, but we now observe the establishment of various gyms in the city’s most affluent areas, reflecting a shift in public perception and further interest of investors in this area. In certain projects, the assistance provided by the Mashhad Municipality to investors in areas such as sports and culture serves as a genuine form of support for the city. Certain areas of the city feature an overconcentration of municipal services. For example, in Parastar, Pastor, and Mohtashami regions, the high density of medical services leads to issues such as time waste, traffic jams, and other challenges. We aim to establish complexes that enhance accessibility to the services outlined, along with enough parking lots and necessary facilities. Although it may seem that the Mashhad Municipality’s revenue will decline due to these incentives, we are, in fact, fostering the development of the city. This is a prudent policy because it has the potential to significantly alleviate some problems of people.”
Urban development through investment incentives
In this meeting, Dr. Mohammadhadi Mahdinia, Chairman of the Construction and Urban Planning Commission of the Islamic City Council of Mashhad, described the targets of these incentives and stated, “This bill includes Group D buildings, i.e., those that are over 10 floors tall or have a floor area exceeding five thousand meters. This bill also provides multiple triggers. The initial challenge of urban development has been the non-realization of service uses, particularly in underdeveloped areas. Projects that serve non-profit or community purposes, such as those focused on health, culture, sports, and education, tend to have the lowest level of realization compared to other development initiatives. The second trigger is the noticeable shift in the trend of commercial buildings globally, originating in the US and progressively extending to Europe and Asia. This shift encompasses the integration of various uses alongside commercial use. In fact, new commercial centers are also offering cultural, sports, and tourism services. The third driver of this bill is the economic imbalance in Mashhad, specifically the significant disparity in the Gini coefficient between the northern and southern regions of the city, which is much more pronounced than in cities such as Tehran. This bill aims to minimize this gap. Accordingly, the consolidated projects that make a greater contribution in addressing the deficit of per capita services in the surrounding area will gain more the municipality’s discounts concerning their rights, including the completion certificate and associated charges.”
Challenges in achieving the objectives of this bill
Mr. Reza Ahadian, an investor and activist in urban planning and construction, acknowledged the advantages brought by the new city council team and expressed gratitude for the sensible approach taken by the Mashhad Municipality. He also discussed the shortcomings of this bill. The Chairman of the Khorasan Razavi Development, Investment, and Construction Association identified the inconsistency between influential institutions and executive agents in construction policymaking as a major obstacle to achieving investment incentives. He said, “The engagement of various government and security institutions in executing projects, along with the inconsistent and conflicting performance of the municipality and other departments, would dissatisfy and discourage the private investors. The collaboration and strong relationship between the governorates, provincial governments, relevant ministries, and municipalities are essential for unified and coherent decision-making, ensuring that no department separately makes decisions in favor or against urban projects. Considering the possible ineffectiveness or infeasibility of bills such as the Comprehensive Construction Investment Incentives Bill, Mr. Reza Ahadian went on to say, “In every province of Iran, the governor does not hold the authority to make decisions. The powers granted to the governors ought to be expanded beyond their current scope, ensuring that the governor serves as the ultimate decision-maker for all provincial matters. When municipal managers, the governor, and the mayor come together to make a collective decision, that decision should serve as the final say. However, in practice, what is done after the meetings is not consistent with the decisions during the meetings. Expressing his dissatisfaction with the contrasting decisions made by two different ministers within a single year, he stated, “Changing or conflicting ministerial decision may impose heavy losses amounting to billions on investors; the multiplicity of decisions made by ministers and poor decisiveness of governors are two major obstacles to economic and industrial development.”
Integrated management; a prerequisite for balanced development
In agreement with Mr. Ahadian’s comments, Mr. Mahdinia regarded the above-mentioned cases as the most important obstacles that investors face. He went on to say, “When we look at the urban development models in developed countries, we notice that in some cases, like Germany, the city parliament gets the last say. Ultimately, the urban management, which includes the municipality and the parliament, have the last say, although they are constantly subject to public opinion pressure. This exemplifies an integrated management system that is absent in Iran; in fact, no unified decision is made in our country, either horizontally or vertically.” The Chairman of the Construction and Urban Planning Commission of the Islamic City Council of Mashhad expressed his disapproval of the former policymakers’ indiscretions in imposing restrictions on construction laws in Mashhad and stated, “In a period, it was decided that no building taller than 23 meters should be built until the preparation and submission of supplementary criteria. However, it has been over three years that these regulations have not been prepared and announced. Under these circumstances, construction in the city continues, as the city is a dynamic entity. Restricting urban development both horizontally and vertically has no result but increases cases of violation and corruption.” Mr. Mahdinia mentioned the experiences of Western nations like Italy and France in this regard, asserting that the disregard for successful models leads to the adoption of uninspired and poorly formulated policies.