Housing finance grows for 5th consecutive quarter

Amounts to Rs54.5b at the end of March, up 5.6%.

KARACHI: Gross outstanding housing finance of all banks and development finance institutions (DFIs) registered growth for the fifth consecutive quarter, according to the latest housing data released by the State Bank of Pakistan (SBP). 

It amounted to Rs54.5 billion at the end of March, which is up Rs2.9 billion or 5.6% on a year-on-year basis.

“Data confirms that the primary housing finance market in Pakistan is at a nascent stage, which needs to be developed by creating enabling environment and initiatives by public and private sectors,” the SBP noted in its brief commentary.

The views of the SBP were echoed by industry representatives who believe the housing sector needs government subsidies as well as bold initiatives from the private-sector banking institutions.

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“Pakistan needs more housing banks that could provide consumers with loans on affordable terms. Moreover, the central bank should bound commercial banks to set aside a certain percentage of their loan portfolio for the housing segment,” Saleem Kassim Patel, former senior vice chairman of the Association of Builders and Developers of Pakistan (ABAD), told The Express Tribune.



House Building Finance Company (HBFC), which is the only housing bank operating in Pakistan, is the largest market player in terms of gross outstanding housing portfolio with a share of 24%.

Of the six categories namely public banks, private banks, foreign banks, Islamic banks, DFIs and HBFC, only Islamic banks and HBFC increased their outstanding housing finance portfolio in the 12-month period ending on March 31.

Outstanding housing loans of HBFC totalled Rs13.1 billion at the end of March, up 6.5% from last year. The same figure for all Islamic banks as on March 31 was Rs16.3 billion, up 32.5% from a year ago. Outstanding housing loans of private banks (Rs18.7 billion) and public banks (Rs6.1 billion) recorded a decrease on a yearly basis. The amount of housing finance provided by foreign banks and DFIs remained constant over the 12-month period with Rs0.3 billion and Rs0.1 billion, respectively.

Data shows a large portion of HBFC’s portfolio consists of small-sized loans of up to Rs1 million as opposed to other institutions whose portfolios seem tilted towards bigger loans of Rs5 million and above.

Read: Housing finance to GDP ratio less than 1%

“This confirms that banks are focusing on high-end customers. There is a need to increase the primary mortgage market by extending services to low-income and salaried-class customers,” the SBP said.

Non-performing loans (NPLs) of the housing sector decreased 12.6% over the 12-month period ending on March 31 when they stood at Rs14.1 billion. At the end of the January-March quarter, HBFC’s share in total sector-wide NPLs was 35%, SBP data shows.

NPLs constituted 38% of HBFC’s total outstanding housing finance at the end of March.

The number of borrowers in the housing finance segment decreased from 75,627 to 70,368, which translates into a decline of 6.9% over the period under consideration.

The mortgage-to-GDP ratio was 0.46% at the end of the first quarter of 2015, which is meagre in contrast with even regional economies of similar size.

Published in The Express Tribune, July 2^nd, 2015.

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