Private sector contributes half of Tehran metro construction costs

21 September 2011

Tehran is seeking $10bn to complete four new metro lines

Almost 50 per cent of the construction cost of the Tehran Metro is being generated by the private sector.

The private sector has generated this money through the metro stations public-private partnership (PPP), created by the Tehran Urban & Suburban Railway Company (TUSRC) to help finance the metro.

The rail company is having trouble raising the $10bn it needs to complete the four urban lines, 3, 4, 6 and 7, that are currently under construction and due to be complete in 2018. The TUSRC is meant to foot half of the bill, with the Tehran Municipality providing the remainder. But international sanctions on the country’s banking sector are making financing difficult to secure.

The TUSRC is testing an alternative financing method to carry out the construction of some of the passenger stations on a PPP basis. The TUSRC gives the plans for the station to a private investor, while the municipality provides the land and permits to build. The government then offers the private investor a loan to help fund the construction.

“This system is working very well,” says Mohammed Montazeri, head of the TUSRC.

The rail body is also trying to sell a $1bn property deal in Tehran to help fund the metro. Money will also be generated from ticket sales.

There are currently nine cities in Iran with a population of more than one million. There are 72 million people in Iran. The construction and operation of Tehran metro has created more than 16,000 jobs.

By the end of 2011, half a billion journeys will have been made on the Tehran metro.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications