‘India has managed housing shortage better’

Published: January 15, 2016


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.

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“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.

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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.

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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 15th, 2016.

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Reader Comments (7)

  • bharat
    Jan 15, 2016 - 9:53AM

    Just one private sector lender handles 1000 loans a day.This figure is incorrect.If you include housing loans from financial institutions and banks ,on any given day its more than 10,000 applications processed for housing loans. India has a massive middle class more than 400 million. In Pakistan maybe its 5 or 10 million.Thats why fewer loans neededRecommend

  • SKChadha
    Jan 15, 2016 - 3:01PM

    The GOI estimates suggests that in India, the 98% of urban housing shortage is only for Economically Weaker Sections (EWS) and Lower Income Groups (LIG). The nation is reaching almost sufficiency in Middle and Higher Income groups in Urban areas. The BJP government recently launched Pradhan Mantri Aawaas Yojna (PMAY) for urban poor. The scheme is aimed to provide “Housing for All by 2022”. Any borrower constructing small house (upto 300-400 sq. feet) will be given 1/3rd of the borrowing as subsidy (i.e. for 6 lacs loan an upfront subsidy of around 2 lacs). This subsidy is also available for slum clearance, PPP models and also for private builders who enter into this segment. This is an ambitious and probably world’s largest housing finance project for EWS & LIG segment …. :-)Recommend

  • Osman
    Jan 15, 2016 - 3:36PM

    @bharat I think the ratio noted by the author is quite reasonable; the average Pakistani bank processes 0.4 loans per day compared to an Indian bank’s 1000. That is remarkable in any case.

    Your assessment of comparative middle class sizes in both countries appears to be significantly off however. According to Credit Suisse’s Global Wealth Report 2015, only 3% of Indian adults (approx 24m, not 400m) are included in the middle class compared to 5.7% of Pakistani adults (approx 6m). So it does seem to be better management of housing by India that is the cause, not the size and proportion of the middle class.

    1. https://publications.credit-suisse.com/tasks/render/file/?fileID=F2425415-DCA7-80B8-EAD989AF9341D47E
    2. http://tribune.com.pk/story/973649/pakistan-has-18th-largest-middle-class-in-the-world-report/

  • Omar Farooq
    Jan 15, 2016 - 3:55PM

    @Bharat- Sadly your figures are driven by TOI and are incorrect. For a change, Indians should start using accurate source of information. Recommend

  • Azeez
    Jan 15, 2016 - 8:52PM

    @Omar Farooq: what you think about India,we are 130 crore people you are only 16 to 17crore.Recommend

  • Woz ahmed
    Jan 15, 2016 - 11:02PM


    Good research sir.

    My concern in these figures is that 500,000 people pay tax in Pakistan, whilst 45 million do so in India, according to the latest figures.

    Also we should multiply the average family size to get the so called middle class.

    Car sales are a good indicator of middle class , the Indian sales are at least ten times ours, but the population six times larger.

    Middle class means different things in different countries….Recommend

  • Umair
    Jan 16, 2016 - 1:58AM

    Pakistan is behind India in every way. Get ready to live under Indian dominance. Recommend

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