Tehran awards $300m in metro deals

25 April 2008
Pilot scheme offers land in attractive locations to developers in exchange for a commitment to build stations.

After a series of setbacks, the Tehran Metro project is at last showing signs of progress, with almost $300m worth of contracts to build 25 new stations across the capital agreed in April.

A pilot scheme to offer land in locations attractive to local developers, in exchange for a commitment to build metro stations, is bearing fruit.

Etebar Gostar Aras, a local import-export business, has signed two contracts worth $200m and $30m for the right to develop several areas of the capital. Sina Tarabar, a local transportation and warehousing group, has signed another $60m agreement.

The locations of the sites the firms will redevelop has not yet been finalised, but the construction of up to 25 stations is included in the arrangements.

Officials at the Tehran Urban & Suburban Railway Company (TUSRC), which is overseeing the metro expansion, say it hopes to issue further contracts worth several hundred million dollars in the future.

“It has been very successful so far,” says one TUSRC official. “Although it has been difficult to bring finance into the project, we were hopeful about this scheme because land and property prices in Tehran are high and there is great demand.

“Companies are keen to buy land to develop new commercial or office space. We work with the Tehran Municipality to help them do this, and at the same time it brings us income to invest in the project, and the metro stations will get built.”

Developers who sign up to the pilot scheme must purchase the land at market value. However, Tehran Municipality will waive many of the usual restrictions.

“For example, if the law says you may only build up to five storeys on this land, this is discounted and the company is allowed to build up to 20 or 25 storeys,” says the TUSRC official.

Tehran has struggled to attract private sector investment to its proposed $18.5bn expansion project for the metro. Western banks have refused to bankroll projects because of US sanctions (MEED 2:11:07).

The TUSRC says construction of the $1.4bn third metro line will be split into three parts. The local Rail Transportation Industries (RTI), which was to be awarded the line, was unable to finance the project. Having received a $100m bank loan, RTI is now able to complete a third of the line.

The TUSRC will begin work on a second portion itself, while a contractor has still to be found for the final section.

In mid-April, a 2.5 kilometre-long section of Line 4 opened to the public, although it includes only three stations.

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