Tehran is renewing efforts to attract private finance for the $18.5bn expansion of its planned metro, by offering additional land to developers.

It is to pilot a scheme that will involve local developers building metro stations in exchange for land in attractive city locations for their own commercial developments.

Tehran Municipality will acquire land around sites designated for the metro stations and compensate the current owners. The land will then be offered to developers, with metro stations incorporated into shopping centres and commercial zones.

“The price of land in Tehran has doubled in the past year,” says an official at the Tehran Urban & Suburban Railway Company, which is overseeing the metro project.

“Instead of the stations opening onto streets, they will open into retail or commercial areas. This should be a good investment. Companies will build the stations and create commercial areas around them. The stations will then attract more passengers to these wider developments.”

The scheme is intended to dovetail with the Tehran master-plan, which was completed and approved in December 2007, after two years of planning.

It aims to establish 14 commercial, industrial or civic centres around the capital, expanding on the handful of traditional business centres.

The plan will be trialled at sites along Line 7 of the metro, which has just passed the planning stage.

The Tehran Urban & Suburban Railway Company says it has already received expressions of interest in the new scheme from local developers. Tehran has been desperate to find investors, after admitting in November 2007 that efforts to bring in private funding had failed and the government would be forced to bankroll the project (MEED 2:11:07).

However, even if it is successful, the scheme will only cover a quarter of the cost of the construction of the metro’s expansion. Line 7 is expected to cost $1.2bn in total, of which the stations will account for an estimated $300m. Digging the tunnel will cost another $300m, which the muni-cipality will shoulder.

Officials hope to attract foreign contractors to invest the remaining $600m needed for electrical and mechanical equipment and rolling stock. Although foreign investors have baulked at funding major infrastructure projects in Iran during a period of political uncertainty, officials hope the situation will improve by the time the tunnelling and stations are completed.

“We are getting started on the civil works and hope the situation improves so we can bring in foreign companies for the electrical equipment and rolling stock,” says the metro official.

Last week, officials admitted they had been forced to modify plans for two high-speed rail links because of a lack of foreign investment, and that the projects were likely to run years behind schedule (MEED 4:1:08).