IFC invests $3.2m for low-cost housing in Pakistan

World Bank to provide $500m credit line to give boost to housing project

KARACHI:

The World Bank has planned to provide a credit line of $500 million to Pakistan for low-cost housing including Prime Minister Imran Khan’s flagship five-million houses project for the low-income people.

Besides, the International Finance Corporation (IFC) – a member of the World Bank Group – on Thursday invested $3.2 million (Rs500 million) in Pakistan Mortgage Refinance Company (PMRC) with the aim of providing financing for low-cost housing in Balochistan and Khyber-Pakhtunkhwa (K-P).

The World Bank had planned to establish the credit line of $500 million (around Rs80 billion) in the ongoing year 2020. However, the coronavirus outbreak has delayed the launch of the programme to next year.

“The World Bank may now provide the credit line (of $500 million) by June 2021,” PMRC Managing Director and Chief Executive Officer Mudassir H Khan told The Express Tribune.

The company provides financing for low-cost housing at around 6% mark-up for a maximum period of 25 years to banks. Banks may charge another 2-2.5%, bringing the total mark-up on low-cost financing to around 8-8.5%. People may acquire financing of up to Rs5 million each for low-cost houses from banks, he said.

This will be the second project of the World Bank with PMRC. Earlier, it established a credit line of $140 million for PMRC for housing projects.

“Under the programme, the company has so far provided a total of Rs11.5 billion financing to banks in the past one and a half year,” he said.

PMRC is a public-private partnership established by the central bank to accelerate mortgage financing and help people build their own homes. It began commercial operations in November 2018. PM Imran has recently provided a relief package for the construction sector - Rs30 billion in subsidy for low-cost housing, a fixed tax regime as per developers’ request and 90% tax reduction for low-cost housing.

IFC acquires stake

“IFC has acquired 12% shareholding in PMRC through the investment ($3.2 million). This is the first-ever investment by the IFC in Pakistan’s housing sector,” Mudassir added.

“PMRC will provide total financing of Rs750 million (including the Rs500 million received from the IFC) to banks having strong presence in Balochistan and K-P. Banks will provide the financing to people for low-cost housing.” PMRC provides financing at 6.5% mark-up for people who come under middle-income groups. They may acquire up to Rs10 million each. It charges the standard market rate or a higher mark-up for high-end loans starting from over Rs10 million.

Banks may provide financing for low-cost housing from their own resources by becoming part of the PMRC risk-sharing scheme of Rs1.65 billion ($10 million). “This programme enables banks to provide financing of up to Rs38 billion. It has been designed to share losses of banks on low-cost financing so that banks could be encouraged to provide long-term financing for up to 20 years, which they usually avoid due to the risk factor.”

The volume of the risk-sharing scheme is expected to rise up to $100 million under the World Bank’s second credit line of $500 million. This will enable banks to provide a total of Rs380 billion in financing.

“We are aiming to provide a total of Rs100 billion in financing in five years,” he said. The company provides comparatively cheaper loans to public and private banks and housing finance companies for onward financing to the general public and builders in the country.

Published in The Express Tribune, July 3^rd, 2020.

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