Top HBFC man looks to clarify new lending portfolio

Low-cost housing will be company’s main “focus”, but other segments will be catered to as well

KARACHI: Insisting that the House Building Finance Company Limited (HBFCL) will not stop lending to middle-income groups, managing director of the housing bank said that the company board has just decided to diversify and “focus” its energy on low-cost housing schemes.

His remarks follow an earlier report that said the HBFC would now provide lending facilities for only those properties that are worth below Rs1.5 million. The development drew flak from builders and stakeholders alike, who said that the HBFC will now only cater to residents of Katchi Abadis.



Some even went to the extent of claiming that the HBFC was running on directives of the federal government that had chosen near election time to “buy out” a vote bank concentrated in such residential areas.

However, HBFC Managing Director Pervez Said sought to dispel those impressions, saying that low-cost housing schemes would now be a “priority”, but other segments have not been ruled out completely.

“Focusing on low-cost housing does not mean that we would stop providing loans to properties worth more than Rs1.5 million,” Said told The Express Tribune.

The HBFC official said that it would continue to provide loans to middle- and upper-middle income groups, adding that Rs1.5 million is not an “upper limit” and does not mean that the company would turn down loan requests from clients whose property value exceeds this figure.

The housing company, according to an internal email which was recently circulated among the top management of the HBFC, has decided to focus on low-cost housing projects “having market value of up to Rs1.5 million and financing need up to Rs1.275 million”.

The construction industry blasted the decision on Thursday.

Association of Builders and Developers of Pakistan (ABAD) Chairman Mohsin Sheikhani on Thursday said that the HBFC’s decision to suspend housing loan facility for all residential projects is unjustifiable.



“The decision has been taken to provide loans to some influential blue-eyed builders at the behest of certain HBFCL Board members, who are said to be running Non-Government Organizations (NGOs),” he added. Builders and developers say that by focusing on property valued at up to Rs1.5 million, the HBFC would deprive middle and upper-middle income segments of the society that prefer to take loans from the HBFC instead of commercial banks.

The decision would badly affect investments of up to Rs50 billion in various residential projects only in Karachi, according to the ABAD management.

Sheikhani urged the HBFC management to reverse its decision immediately for the survival of the construction industry; otherwise ABAD would have no choice but to seek legal action.

He also said that the government should intervene and put an end to such drastic measures.

Meanwhile, there is panic among the rank and file of the HBFC.

There are concerns among the employees that the new directives to focus on low-cost housing schemes may not work because it may create huge bad loans, affecting the financial health of the company.

Builders, especially those who are about to complete their high-rise projects in big cities, are worried that they might not get HBFC financing for their customers as the company is now going to divert its already scarce resources towards low-cost housing schemes.

The HBFC -- the only public sector housing bank in Pakistan -- is the largest market player in terms of gross outstanding housing portfolio with a share of about 24%. Other than the HBFC, currently, 24 commercial banks and a microfinance bank are providing housing finance in the country.

Housing finance remains pitifully low in Pakistan. The mortgage-to-GDP ratio was 0.5% at the end of 2015. 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 take housing loan across Pakistan is continuously showing dismal growth over the years.

Published in The Express Tribune, October 7^th, 2016.

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