PHOTO: FILE
KARACHI:
Outstanding housing finance has registered growth for the seventh consecutive quarter, according to housing finance data released by the State Bank of Pakistan (SBP) on Tuesday.
Housing finance of all banks and development finance institutions (DFIs) amounted to Rs58 billion at the end of September, which is up 3.4%, or Rs1.9 billion, from revised gross outstanding housing finance (Rs56.1 billion) at the end of June. The increase in the outstanding housing finance on a yearly basis amounts to 9.6% or Rs5.1 billion.
In a self-congratulatory note, the SBP said in its brief commentary on housing finance data that banks remained active in extending housing finance in Jul-Sept, with the rise in disbursements reflecting “efforts to create enabling environment”.
Notwithstanding the upbeat tone of the SBP, housing finance remains pitifully low in Pakistan. As per a World Bank study carried out in 2009, there is a backlog of 7.5 million housing units in Pakistan, which is increasing by 0.35 million housing units every year. Yet the number of people who took out a housing loan across Pakistan in the three-month period under review was only 1,022.
Given that fresh disbursements amounted to Rs4.7 billion in Jul-Sept, the average loan size in the quarter remained Rs4.6 million - an indication that housing finance is availed mainly by the relatively affluent segments of society. Over 62% of gross outstanding housing finance falls in the category of “outright purchase” while “construction” and “renovation” products had a share of 25.9% and 11.5%, respectively.
Currently, 24 commercial banks, one microfinance bank and House Building Finance Company (HBFC), which is the only housing bank in Pakistan, are providing people with housing finance. HBFC is the largest market player in terms of gross outstanding housing portfolio with a share of 24%.
Outstanding housing loans of HBFC amounted to nearly Rs14 billion at the end of September, up 11.7% from last year. The same figure for the Islamic banking industry (five Islamic banks and 14 Islamic banking divisions of conventional banks) stood at Rs22.3 billion on September 30. Compared to the preceding quarter, gross outstanding of the Islamic banking industry increased 5.8% in the three months ending on September 30.
Outstanding housing loans of private banks were Rs18.4 billion and public banks were Rs6 billion at the end of September. This shows Islamic and private (conventional) banks remained major contributors to gross outstanding housing finance during the 12-month period ending on September 30.
The amount of housing finance provided by foreign banks and DFIs decreased slightly from Rs0.44 billion to Rs0.42 billion over the 12-month period ending on September 30.
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.
Non-performing loans (NPLs) increased from Rs13.5 billion at the end of June to Rs14.1 billion at the end of September. However, NPLs declined 11.3% on a year-on-year basis.
HBFC’s NPLs increased Rs0.5 billion, or 11.1%, over the Jul-Sept quarter. The share of NPLs in its total outstanding housing finance portfolio has decreased significantly (15.1%) over the preceding 12-month period. Almost 36% of HBFC’s total outstanding portfolio consists of NPLs while its percentage share in the industry-wide NPLs clocked up at 35.6% at the end of September.
The mortgage-to-GDP ratio was 0.48% at the end of the third quarter of 2015. It has slightly dropped from 0.49% recorded at the end of the second quarter.
Published in The Express Tribune, December 30th, 2015.
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