Af­ford­able hous­ing

The Pak Banker - - FRONT PAGE -

There is a grow­ing short­age of low cost hous­ing for the masses. While of­fi­cial es­ti­mates put the short­age at 10 mil­lion units, which in­creases every year, funds re­quired to fi­nance the gap are a stag­ger­ing $180 bil­lion - al­most half the size of Pak­istan's econ­omy. A low-cost unit costs at least Rs2.1 mil­lion, and there's a des­per­ate need to pro­vide loans to the peo­ple for the same.

Pak­istan Mort­gage Re­fi­nance Com­pany is of the view that prop­erty de­vel­op­ment needs to be reg­u­lated in a bid to en­cour­age hous­ing units for low-in­come groups. There is a huge de­mand for low-cost houses, but de­vel­op­ment only adds high-end units.

Low in­ter­est rates on mort­gage is the only way to ad­dress the cri­sis. Un­for­tu­nately, mort­gages in Pak­istan ac­count for only 0.5 per cent of its GDP while In­dia's mort­gage-to-GDP ra­tio stands at 10 per cent and Malaysia's is at 30 per cent. Ac­cord­ing to a re­search re­port, only 1 per cent of the hous­ing units de­vel­oped an­nu­ally cater to 68 per cent of Pak­istan's to­tal pop­u­la­tion, com­pris­ing peo­ple who earn a max­i­mum monthly in­come of Rs30,000. Mean­while, it is also said that 56 per cent of the hous­ing units con­structed dur­ing the year caters to a mar­ket rep­re­sent­ing 12 per cent of Pak­istan's pop­u­la­tion that earns above Rs100,000.

Dif­fer­ent gov­ern­ments in the past have an­nounced low-cost hous­ing schemes, but sub­stan­tial progress on any front is yet to be seen. At present , the banks have to take risk as they pro­vide long-term hous­ing loans while they have short-term de­posits. Most of the de­posits in the banks are meant for less than one year which is the main hur­dle in giv­ing long-term loans. The PMRC has Rs6bn funds with Rs1.2bn con­trib­uted by the fed­eral gov­ern­ment and the rest was con­trib­uted by nine com­mer­cial banks. Re­port­edly, the PMRC is also in con­tact with the In­ter­na­tional Fi­nance Cor­po­ra­tion (IFC) and Asian De­vel­op­ment Bank (ADB) to get sup­port for the mort­gage hous­ing de­vel­op­ment.

Af­ford­able hous­ing has al­ways been a big prob­lem in Pak­istan. Lately, banks and fi­nan­cial in­sti­tu­tions in Pak­istan are tak­ing in­ter­est in mort­gage fi­nance. The SBP's Quar­terly Hous­ing Fi­nance Re­view has re­vealed that the hous­ing fi­nance is con­tin­u­ously in­creas­ing and posted a healthy growth of some Rs 4.9 bil­lion dur­ing the first half of the cal­en­dar year. With the cur­rent surge, the over­all hous­ing fi­nance port­fo­lio of all banks and DFIs has reached Rs 65.70 bil­lion com­pared to Rs 60.80 bil­lion pre­vi­ously, show­ing an in­crease of 8 per­cent. As things stand to­day, HBFCL is the largest lender and share­holder in terms of gross out­stand­ing, with 24 per­cent as the out­stand­ing loans of HBFCL amount­ing to Rs 15.46 bil­lion.

Cat­e­gory-wise, Is­lamic banks are the largest play­ers with 38 per­cent share in gross out­stand­ing. Over­all Is­lamic and pri­vate banks are ma­jor con­trib­u­tors to gross out­stand­ing of hous­ing fi­nance. The share of pri­vate banks and Is­lamic Banks (IBs) in the gross out­stand­ing stood at 30 per­cent and 38 per­cent, re­spec­tively as on June 30, 2017. Four­teen Is­lamic Bank­ing Di­vi­sions (IBDs) and five IBs have 12 per­cent and 88 per­cent share, re­spec­tively in hous­ing fi­nance port­fo­lio of Is­lamic Bank­ing In­dus­try. With the new ini­tia­tive now launched by PMRC it is hoped that the home fi­nance mar­ket in Pak­istan will ex­pand rapidly in com­ing years mak­ing it eas­ier for peo­ple to ob­tain loans house build­ing. The gov­ern­ment needs to adopt in­no­va­tive ways to make it eas­ier for peo­ple to build their own houses.

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