SBP hous­ing ini­tia­tive

The Pak Banker - - FRONT PAGE -

The State Bank of Pak­istan has taken a num­ber of ini­tia­tives lately to solve the is­sue of hous­ing for the poor. Af­ter an­nounc­ing 'Pol­icy for Pro­mo­tion of Low-Cost Hous­ing Fi­nance' last month, the SBP has now taken the govern­ment and Pak­istan Mort­gage Re­fi­nance Com­pany (PMRC) on board for pro­vi­sion of cheap fi­nanc­ing to help solve the prob­lem of hous­ing short­age. It may be re­called here that the cen­tral bank had ear­lier re­leased a de­tailed study which high­lighted the prob­lems faced by the hous­ing sec­tor and sug­gested pos­si­ble mea­sures to solve the cri­sis with the ini­ti­a­tion of hous­ing fi­nance pol­icy. The SBP af­ter re­leas­ing the re­port an­nounced a pol­icy to pro­vide low-cost hous­ing fi­nance fa­cil­ity to bor­row­ers in or­der to bridge the widen­ing de­mand and sup­ply gap in the hous­ing sec­tor.

The pop­u­la­tion is grow­ing at an av­er­age rate of 2.4 per cent since 1998 and the an­nual de­mand for new homes is ap­prox­i­mately in­creas­ing by 0.7 mil­lion a year whereas only about half of this de­mand is cur­rently be­ing met. Over­all, the coun­try is cur­rently fac­ing a hous­ing short­age of about 10m units. A re­cent re­port said that out­stand­ing hous­ing fi­nance vol­ume from banks and the House Build­ing Fi­nance Cor­po­ra­tion stands at around Rs 83 bil­lion, equiv­a­lent to only 0.5 per cent of GDP, lower than that of In­dia and Bangladesh. The SBP an­nounced low-cost hous­ing fi­nance fa­cil­ity in the coun­try on July 18 this year ask­ing stake­hold­ers to send their sug­ges­tions within 15 days.

It may be added here that Pak­istan Tehreek-i-In­saf, which is ex­pected to form the next govern­ment, has al­ready an­nounced its plans to build 5m hous­ing units across the coun­try in its man­i­festo. The mas­sive plan could cre­ate mil­lions of jobs and im­pact at least 42 al­lied in­dus­tries linked to the con­struc­tion sec­tor. In this con­nec­tion, it is in­ter­est­ing to note that the hous­ing pol­icy an­nounced by the then govern­ment in 1990s to stim­u­late the econ­omy could not be im­ple­mented. Need­less to say, one of the key con­straints ham­per­ing sup­ply of hous­ing units is the un­avail­abil­ity of fi­nanc­ing. The for­mu­la­tion of pol­icy for low-cost hous­ing is an at­tempt to re­solve is­sues faced by the mort­gage in­dus­try.

Ac­cord­ing to the SBP, the new pol­icy has been for­mu­lated keep­ing in view in­ter­na­tional best prac­tices and lo­cal mar­ket con­di­tions. In or­der to fa­cil­i­tate this pol­icy, the PMRC was formed in April this year to pro­vide fi­nanc­ing to banks so that the banks could pro­vide long term loans for hous­ing in the coun­try. Share­hold­ers Agree­ment of PMRC was signed in Karachi on 15 April, 2018 with the govern­ment (Na­tional Bank of Pak­istan and Min­istry of Fi­nance) and pri­vate sec­tor banks hold­ing 49 per cent and 51 per cent stake in the Com­pany.

The PMRC's pri­mary role will be to pro­vide medium and long term liq­uid­ity to banks in or­der to help stim­u­late de­vel­op­ment in the sec­tor. Fur­ther­more, a Malaysian ex­pert on hous­ing, N.K. Ru­pan was hired as CEO of the PMRC who iden­ti­fied the lack of long term liq­uid­ity to fi­nance hous­ing in Pak­istan as one of the ma­jor im­ped­i­ments in the de­vel­op­ment of hous­ing sec­tor in the coun­try. The SBP ear­lier said that it will in­tro­duce a sub­si­dized fi­nanc­ing fa­cil­ity for low cost hous­ing by pro­vid­ing liq­uid­ity to the fi­nan­cial in­sti­tu­tions at sub­si­dized rate. SBP will pro­vide re­fi­nance up to Rs1m or 50 per cent of loan amount at a rate of 1 per cent to banks or DFIs and the end bor­rower rate will be 5 per cent. The re­main­ing 50 per cent of the loan or fi­nanc­ing amount will be their own sources at fixed rate of up to 12 per cent. Sim­i­lar fi­nanc­ing fa­cil­ity will also be pro­vided through the Is­lamic Fi­nan­cial In­sti­tu­tion which will go a long way to ease hous­ing short­age in the coun­try.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.