‘India has managed housing shortage better’

Former HBFC chairman says Pakistan needs more housing banks

KARACHI: If you think the increase in the outstanding housing finance for seven consecutive quarters is great news, you need a wider perspective.

As opposed to roughly 1,000 housing loans that 26 financial institutions process every quarter across Pakistan, only one private-sector lender handles about 1,000 housing loans every day in India.



“India has done a far better job in managing its housing shortage,” according to Zaigham Rizvi, former chairman of House Building Finance Corporation (HBFC), the only housing bank in Pakistan.

Speaking at a conference on non-bank financial sector and capital markets organised by the Securities and Exchange Commission of Pakistan (SECP) in collaboration with United States Agency for International Development (USAID) on Thursday, Rizvi said Pakistan is the only country in the world where housing shortage is growing while the share of mortgage in the GDP is shrinking.

At the end of September, the outstanding housing finance extended by all banks and development finance institutions (DFIs) amounted to Rs58 billion, up 3.4% from the quarter ending on June 30, 2015.



After reaching Rs86 billion around eight years ago, the outstanding housing finance decreased in the wake of the financial crisis that forced banks to pull out of the mortgage market.

The mortgage-to-GDP ratio in Pakistan is 0.48%, which is miniscule compared to India (9%), Sri Lanka (6%) and Bangladesh (3%).

“We need more housing banks. Only HBFC cannot be sufficient,” Rizvi added, who also serves as the chairman of the Center for Affordable Settlements and Housing, an independent think tank based in Karachi. The housing backlog in Pakistan was 7.5 million housing units in 2009, which is growing by 0.35 million housing units annually, according to the World Bank.

Access of housing finance in Pakistan is particularly limited when it comes to the low-income segments of society. The difference between the average size of a home loan made by commercial banks and that by HBFC points to the fact that needs of low-income people are exclusively met by the government-owned housing bank.



According to the latest data released by the SBP, the average loan size for HBFC is Rs2.8 million while that of private banks is Rs7.8 million. The SBP says HBFC has a large portion of its portfolio in small-sized loans of up to Rs1 million as opposed to other financial institutions that have mainly extended bigger loans of up to Rs5 million and above.

Published in The Express Tribune, January 15^th, 2016.

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