Iranian and South Korean companies have signed a contract worth €720 million ($856.6 million) to jointly build 450 rail carriages for use in suburban Tehran, revealed an official.

Hyundai Rotem, a South Korean manufacturer of rolling stock, recently signed the agreement with the Iranian Rail Industries Development Co (IRICO) in Tehran, Babak Ahmadi, deputy head of the Islamic Republic of Iran Railways, was quoted as saying in an Iran Daily News report.

Two-thirds of the carriages will be manufactured in Iran and the rest in South Korea which will also provide finance, Deputy Minister of Roads and Urban Development Saeed Mohammadzadeh said.

He added that the duration of the project is 78 months, and the first set of the carriages will be delivered in less than 1.5 years.

South Korea's Eximbank signed a contract with Iranian banks in August to provide €8 billion ($9.4 billion) in loans for financing various projects by South Korean companies in Iran.

Mohammadzadeh said the contract also includes transfer of technology, enabling the state-owned Iranian company to manufacture rail carriages under license.

Tehran and other major Iranian cities are aggressively developing a mass-transit system in which metro transportation plays a vital role, added the report.