KARACHI: As the country looks to meet a housing shortfall of 10 million units, the Pakistan Mortgage Refinance Company (PMRC) is gearing up efforts to extend loans to low- and middle-income segments to ease liquidity concerns.
A shareholders’ agreement was signed on Saturday, marking a step towards the government’s promise of making housing affordable by extending loans to low- and middle-income segments. The government holds a 49% stake, while private sector banks hold the remaining majority share in the PMRC.
Among shareholders are the Ministry of Finance, Habib Bank Limited, United Bank Limited, National Bank of Pakistan, Askari Commercial Bank Limited, Allied Bank Limited, Bank Alfalah, Bank AL Habib and House Building Finance Company.
PMRC Managing Director and CEO N K Rupan said Pakistan has among the lowest mortgage-to-GDP ratios in the region, standing at a paltry 0.5%. “In comparison, India has it at 10% and Malaysia’s is 30%,” he said on the sidelines of the signing ceremony. “Islamic banks have been successful in this segment as their mortgages amount to 43%.”
Rupan said housing mortgage rates should be fixed. “In other markets, where there is fixed rate mortgaging, it has been observed that the default rate is low.” He added that corporate bonds PMRC floats would be offered at 15 to 20 basis points over the government-offered bonds.
“There is a need for property developments for low- and middle-income groups. He further said that property developers have to be regulated, which Malaysia did in 1966.”
According to estimates, there are 562 slums in Karachi alone, signifying the need for housing development for low-income groups. Association of Builders and Developers (ABAD) Patron Mohsin Sheikhani, however, told The Express Tribune that the figure is even higher.
Jameel Ahmed, deputy governor of the State Bank of Pakistan, reiterated that Pakistan faces a shortage of 10 million housing units.
“Supply- and demand-side issues are getting complex, and give rise to irregular settlements in the country. Such settlements are the breeding ground of crimes.”
Rehmat Ali Hasnie, chairman of the PMRC’s Board of Directors, said that the entity is an example of private-public partnership that would address the issues of housing shortage by extending financing to low- and middle-income groups.
Pakistan’s gross outstanding housing finance portfolio as of December 2013 was Rs51 billion. It has increased close to 57% to Rs80 Billion in four years as low interest rates, increasing purchasing power, and housing shortage contribute to the growth. Namous Zaheer, representative of the World Bank, said that there is a significant market gap across all segments of the population for housing finance.
In this regard, the World Bank has approved a $140-million credit line for PMRC. She said another objective of the World Bank’s line of credit is to enable women to increase their house ownership as presently, only 2% own houses in the country.
Published in The Express Tribune, April 15th, 2018.