Iraq to Boost Private Sector:
The Iraq National Housing Policy 2025-2030 sets out plans to strengthen private sector participation in housing finance through Policy 3.4, which focuses on providing facilities for government-subsidised housing loans to enable private lending.
The sub-pillar, titled “Increase the Ability of Private Banks to Provide Affordable Loans,” addresses the limited role of Iraq’s private banks in the housing sector.
According to the policy, private banks have so far avoided mortgage lending due to insufficient long-term funding instruments, high perceived risk, and weak foreclosure and loan recovery mechanisms. Regulatory barriers, low liquidity, and limited technical capacity have further constrained lending to underserved groups.
To address these challenges, the policy proposes several key measures:
- Establish a Housing Credit Facility: The Central Bank of Iraq in coordination with MOF [Ministry of Finance] will develop and launch a credit facility to provide long-term, low-interest funding to private banks issuing qualified housing loans. This facility will complement the refinancing mechanism by offering direct liquidity support and incentivising broader lending to underserved market segments.
- Introduce a Mortgage Risk-Sharing Mechanism: Launch a guarantee scheme through the Ministry of Finance or Central Bank to partially cover losses on eligible loans, reducing credit risk for participating banks.
- Enact Regulatory Reforms: Amend the Real Estate Rental Law to clarify foreclosure and collateral enforcement procedures. Repeal automatic leaseholds, introduce temporary tenant support (e.g., rental aid or social housing), and streamline judicial foreclosure processes.
- Provide Technical Assistance to Banks: Support product development for standardised Islamic and conventional loans. Offer guidance on underwriting, borrower assessment, and digital lending platforms for broader outreach.
- Prioritise Housing Loans through Regulatory Incentives: Classify housing finance as priority sector lending to allow reduced reserve requirements, modest subsidies, and regulatory flexibility for participating institutions.
- Establish a secondary mortgage market: Move towards enacting or activating relevant legislation and allow both public and private banks to borrow from institutions with available capital, such as the Pension Fund, insurance companies, and minors’ funds.
The policy justifies these reforms as essential to expanding Iraq’s housing credit pool and fostering a predictable legal and regulatory environment. Through a combination of credit facilities, risk-sharing mechanisms, and institutional support, private banks will be better positioned to extend affordable housing loans.
In the long term, these reforms are expected to stimulate market competition, broaden access to finance, and pave the way for innovations such as a secondary mortgage market and asset-backed securities.
