Designing a Real Estate Financing Model Based on the Capacity of the National Housing Fund

Extended Abstract
 
Introduction and Objectives: The persistent imbalance in Iran’s housing finance system reflects deeper governance shortcomings beyond cyclical economic constraints or funding shortages. Central among these weaknesses are the lack of credible investor protection, recurring conflicts of interest, and the absence of institutional trust-building mechanisms. In contrast, common-law jurisdictions use Real Estate Investment Trusts (REITs) to address these problems through an independent trustee, whose legal responsibility is to safeguard beneficiaries and enforce transparency, auditing, and disclosure.
Under Iran’s civil-law system, the concept of trust does not exist as a separate legal entity. However, similar functions may be carried out by boards of trustees within public or semi-public bodies. This paper proposes a trusteeship-based housing finance model that utilizes this institutional feature. The model places the National Housing Fund (NHF) at the center as a fiduciary board of trustees with oversight responsibilities, while provincial housing funds act as operational agents through private sector participation.
The model has four objectives: (1) Translate trustee duties into Iranian legal and administrative practices via boards of trustees; (2) Align investor protection with broader social goals, including affordable and rental housing; (3) Delegate project execution to provincial funds while maintaining unified standards; and (4) Develop both market-based and non-market instruments under NHF supervision. Ultimately, the paper recommends revising the bylaw of real estate and property investment funds (1404) to formally embed the NHF’s fiduciary role in Iran’s capital-market and off-market financing framework.
Method: The study employs a three-phase methodological design integrating document analysis, comparative study, and institutional modeling.
Phase 1 – Legal Review: Iranian statutes and bylaws were examined to identify institutional contexts in which boards of trustees perform fiduciary or oversight functions. Examples include the National Housing Fund, the Innovation and Prosperity Fund, and pension fund management structures. The analysis illustrates that Iranian law already recognizes the capacity of trustee-like bodies to act as guardians of stakeholder interests.
Phase 2 – Comparative Study: The research then examines REIT structures in selected countries such as the United States, Singapore, and Malaysia. These models demonstrate how fiduciary principles—investor protection, independent auditing, conflict-of-interest management, and systematic disclosure—form the backbone of real estate finance. The goal here is not to import these systems but to distill transferable governance principles adaptable to Iran’s legal and institutional environment.
Phase 3 – Institutional Design: Drawing from both Iranian and international experiences, the study formulate a two-tier fiduciary model: Tier 1: The NHF functions as a central board of trustees responsible for investor protection, financial oversight, and strategic coordination. Tier 2: Provincial housing funds implement projects with private-sector partners under NHF’s licensing and supervision. Operational mechanisms include transparent financial reporting, regular audits, risk management committees, and anti-speculation safeguards to ensure stability and credibility.
Results: The findings confirm that it is feasible to achieve the governance and accountability benefits of a trustee system without importing the common-law trust form. When fiduciary duties are embedded within the NHF’s legal and operational framework, the institution gains a clear and credible mandate to protect investors, manage risks, and oversee compliance.
First, centralizing fiduciary authority in the NHF enhances institutional clarity and investor confidence. By explicitly defining fiduciary responsibilities—such as risk control, auditing, and transparency—the NHF becomes a trusted intermediary capable of mobilizing private and institutional capital into housing projects.
Second, decentralizing implementation to provincial housing funds strengthens local responsiveness. These funds can leverage local information and partnerships to design and execute projects tailored to regional housing needs. Meanwhile, the NHF ensures coherence and accountability through licensing, reporting, and performance evaluation. This balance of central oversight and local execution minimizes inefficiencies and ensures equitable regional development.
Third, the model introduces a dual financial architecture: exchange-traded funds (ETFs) to attract private investors and support market-oriented projects, and non-tradable funds to channel resources into socially mandated programs such as affordable housing, urban renewal, or rental housing development. Both types operate under NHF supervision with identical fiduciary safeguards, ensuring that expanded access to finance does not compromise transparency or governance quality.
Discussion and Conclusion: This research demonstrates that the fiduciary discipline traditionally associated with common-law trusts can be operationalized in a civil-law context through institutional adaptation. By empowering a central fiduciary entity (NHF) and embedding trustee-like obligations within its bylaws and oversight mechanisms, the model provides a legally sound and administratively feasible solution to Iran’s chronic housing-finance inefficiencies.
The model’s contextual approach avoids legal transplantation and instead focuses on functional equivalence—ensuring that investor protection, transparency, and accountability are embedded as enforceable governance practices. Centralization ensures consistency, while decentralization promotes agility and regional relevance.
Potential implementation challenges include political influence over fund allocation, managerial capacity gaps at the provincial level, and limited financial literacy among participants. To mitigate these risks, the model recommends transparent reporting systems, independent audits, merit-based appointment of fund managers, and continuous monitoring of key performance indicators.
Future studies should test pilot projects in selected provinces to assess how the model performs under varying governance capacities. Metrics should include investor confidence, cost-efficiency, risk-adjusted returns, and social outcomes such as affordability and access. Empirical evaluation would also enable fine-tuning of legal frameworks and supervisory practices.
In conclusion, the proposed National Housing Fund trusteeship model offers a viable, indigenous framework for real estate financing in Iran. It builds institutional credibility, encourages private-sector participation, and supports sustainable and inclusive housing development. By embedding fiduciary principles into national governance structures, Iran can enhance transparency, attract investment, and deliver long-term stability in the housing market—achieving both financial efficiency and social equity within a unified institutional design.