State-owned housing finance giant cuts funding

HBFC slashes loans to individuals for construction, renovation of homes

KARACHI:

The House Building Finance Corporation (HBFC) has reportedly stopped providing subsidised housing and construction loans to the general public.

According to the financial performance report of the state-owned housing finance giant till December 31, 2023, new financing has been slashed for the purchase, construction, and renovation of houses.

Despite being highly paid, the senior management officers of the corporation seem to be unable to effectively manage the organisation.

Furthermore, financial irregularities and mismanagement have become major obstacles for the privatisation of HBFC. From the issuance of loans to the awarding of IT contracts, financial irregularities have become the norm at HBFC, while illegal appointments to top management positions have also tarnished the institution's reputation.

As per details, the country's only government housing finance institution, HBFC, has failed miserably in its constitutional responsibility to provide housing loans to the low-income section. The financial position of HBFC can be assessed from the fact that, compared to the loans of Rs14.27 billion issued by HBFC to the public, HBFC itself has liabilities amounting to Rs26.27 billion, which is more than 47 per cent of the total assets of the institution.

The financial performance report of the institute till December 31, 2023 states that new financing has not been conducted under 12 out of 13 schemes for the purchase, construction, and renovation of houses.

The financial records also reveal that new loans of more than Rs75 million were issued for the installation of solar systems ranging from three kilowatts to 20 kilowatts in just one year under the Ghar Ujala scheme.

On the contrary, there was a trend of decrease rather than an increase in loans for the construction, renovation, or purchase of houses. The total value of advances on December 31, 2023, was Rs13.5 billion, while on December 31, 2022, the total value of advances was recorded at Rs15.6 billion.

Statistics show that no public loan scheme of HBFC has been operational during the period under review.

While HBFC did not advance housing loans to the general public, the institution's staff were profoundly favoured with easy financing for housing needs, as evident from the volume of staff loans, which has been continuously increasing instead of decreasing.

Consequently, the company's expenses are increasing, and operating expenses have reached Rs1.8 billion. Instead of providing subsidised loans to people living in rented houses during inflation, all the favours of HBFC are limited to its employees.

The corporation has provided highly subsidised loans to its employees during the past year for the purchase, construction, and repair of houses at a very low-interest rate of three per cent. Apart from this, loans were issued for five years at a four per cent interest rate for the purchase of cars.

Meanwhile, loans equivalent to five months' salaries were also issued to officers for a period of two years.

The records also disclosed that staff loans of Rs177 million were given to employees in a period of one year. The total value of the loans issued in this regard has reached Rs775 million.

Interestingly, HBFC is also failing in the recovery of loans issued to its employees, with staff defaulters owing Rs5.5 million in overdue loans.

Furthermore, Pakistan Auditor General has also pointed out serious irregularities in the performance of HBFC, which include matters like the appointment of the Chief Financial Officer and Managing Director against the rules, provision of car and driver facility to the former Managing Director, and distribution of cash awards to employees despite the low financial performance of the company.

The Auditor General has also identified irregularities in the contracts awarded by HBFC, according to which three companies were awarded the contract despite having made lower bids.

The total value of such objectionable contracts was Rs27.4 million.

Furthermore, during the year 2021, contracts worth Rs130 million were given illegally by changing the cost and nature of work in the contracts.

The HBFC management has presented its stance regarding this issue. All the contracts in HBFC were awarded under a transparent and non-discriminatory process as per the rules of the Public Procurement Regulatory Authority (PPRA).

A spokesperson from HBFC said that the appointments made in previous years were also made under the approved policy in which merit was prioritised.

The spokesperson further said that the institution has issued new loans worth 11 billion rupees in the last two years.

In three years, the value of non-performing loans has reduced by Rs1.4 billion. The value of total non-performing loans came to Rs2.7 billion. According to the spokesperson, the administration is efficiently running the institution and is in touch with the Privatisation Commission, providing full support for the institution’s privatisation.