Banks to give Rs330b in housing finance

SBP intends to improve housing, construction financing to 1% of GDP from current 0.2%

Commercial banks will lend Rs330 billion for housing and construction activities over the next one year, which will improve financing to 1% of gross domestic product (GDP) from 0.2% at present, said State Bank of Pakistan (SBP) Deputy Governor Sima Kamil.

Speaking at the launching ceremony of certificate courses on housing finance, legal framework, mortgage, monitoring and documentation at the Institute of Bankers Pakistan (IBP), she said housing and construction were very important for the economy of any country.

"Our mortgage-to-GDP ratio is the lowest in the region," she pointed out while talking about the State Bank's scheme aimed at promoting housing and construction finance.

"Housing and construction finance ratio in Pakistan currently stands at 0.2% of GDP while the ratio stands at 3% in Bangladesh and 6% in India."

Apart from creating direct employment opportunities, the housing and construction sector was associated with 40 different sectors, therefore, it was of huge importance, she stressed.

She added that apart from the SBP, private banks, non-banking financial institutions and think tanks were working collectively to make the scheme successful.

"Every week we have a meeting with them on the project," she said. "We are working on income estimates for the eligibility of applicants."

According to Kamil, the State Bank is mulling over various estimate options for mortgages such as utility bills and telecom bills. Terming the SBP an enabler and facilitator of the scheme, she said mainstream private banks had to come forward to make it successful.

"It is for the first time that 5% housing and construction loan target has been fixed for commercial banks, which is expected to reach Rs330 billion or around 1% of GDP next year," she said.

The Supreme Court of Pakistan has changed a law for mortgage finance, which allows mortgage finance institutions to confiscate property if borrowers fail to pay back dues, she said.

"The scheme is designed in a way where borrowers will only have to pay Rs10,000 to Rs13,000 every month, which will be in their reach," she said. "We are pleased to see that many banks have initiated the process of lending and this is just the beginning."

She appreciated Islamic banks over the issuance of a hefty mortgage and termed it a great step from their side.

According to her, foreign banks are also playing their part as Standard Chartered ranked the third biggest bank in the provision of housing and construction finance.

Published in The Express Tribune, October 30^th, 2020.

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