Iraq Plans to Boost Private Sector Role in Housing Finance

Iraq’s National Housing Policy 2025-2030 aims to strengthen private sector participation in housing finance. Policy 3.4 focuses on helping private banks provide loans for government-subsidised housing.

The sub-pillar, “Increase the Ability of Private Banks to Provide Affordable Loans,” addresses the limited role of private banks. Banks have avoided mortgage lending due to short-term funding, high perceived risk, and weak foreclosure mechanisms. Regulatory barriers, low liquidity, and limited technical capacity also restrict lending to underserved groups.

The policy introduces several key measures:

1. Establish a Housing Credit Facility: The Central Bank of Iraq, with the Ministry of Finance, will provide long-term, low-interest funding to private banks. This facility will encourage broader lending to qualified borrowers.
2. Introduce a Mortgage Risk-Sharing Mechanism: The Ministry of Finance or Central Bank will cover part of the losses on eligible loans. This reduces credit risk for participating banks.
3. Enact Regulatory Reforms: The government will amend the Real Estate Rental Law to clarify foreclosure and collateral procedures. It will streamline judicial processes and offer temporary tenant support.
4. Provide Technical Assistance to Banks: Authorities will guide banks on loan products, underwriting, borrower assessment, and digital lending. This support will help reach more borrowers.
5. Prioritise Housing Loans through Regulatory Incentives: Housing finance will receive reduced reserve requirements, subsidies, and regulatory flexibility for participating banks.
6. Establish a Secondary Mortgage Market: Legislation will allow banks to borrow from pension funds, insurance companies, and other capital providers.

These reforms aim to expand Iraq’s housing credit pool. They will create a predictable legal and regulatory environment. Over time, they will increase competition, broaden access to finance, and enable innovations like secondary mortgage markets and asset-backed securities. Private banks will play a central role in affordable housing.