House Building Finance Company (HBFC) has received an equity injection of Rs11 billion from the federal government, according to HBFC Managing Director Pervaiz Saeed.
Speaking to The Express Tribune on Thursday, Saeed said the equity injection would play an important role in increasing the HBFC’s footprint in the mortgage market.
The finance ministry and the State Bank of Pakistan (SBP) had decided in the beginning of the current fiscal year that loans acquired by the HBFC from the SBP would be converted into equity.
HBFC is the sole specialised housing bank in Pakistan and enjoys a 24% share in the housing finance market.
“It is a positive development, as the equity injection is likely to result in improved liquidity for the HBFC,” Saeed said.
Talking to The Express Tribune, Association of Builders and Developers (ABAD) Senior Vice Chairman Saleem Kassim Patel demanded that the government should provide the HBFC with further equity given the declining mortgage-to-gross domestic product (GDP) ratio in Pakistan. It stood at 0.50% as of March 31, according to the SBP.
“The government should inject equity of at least Rs20 billion into the HBFC on an urgent basis,” Patel said, adding that the decline in the mortgage-to-GDP ratio can only be contained by making housing affordable for the middle and lower-middle income groups.
Latest SBP data shows a dip in the gross outstanding housing finance by all banks and development finance institutions (DFIs). It amounted to Rs51.6 billion at the end of March as opposed to Rs52.6 billion a year ago, reflecting a decrease of 1.9%, or Rs1 billion, over a 12-month period.
Outstanding loans of the HBFC decreased to Rs12.2 billion at the end of the first quarter of 2014, which is 2.6% less than the corresponding figure at the end of the first quarter of 2013.
With the exception of Islamic banks, the banking sector decreased its footprint in the mortgage market, recent statistics show. Fresh disbursements of Rs2.3 billion were made to 658 borrowers during the quarter ending March 31. Islamic banks extended new disbursements worth Rs1.3 billion followed by private banks (Rs514 million) and public-sector banks (Rs68 million).
HBFC’s fresh disbursements for the first quarter of 2014 amounted to Rs463 million. Disbursements made in the 12-month period ending on March 31 amounted to Rs1.69 billion.
Patel said private banks should set aside at least 5% of their total loan disbursements for the housing segment. “Forward and backward linkages to 72 allied industries make the housing industry a key driver of economic growth. Banks should step forward and help reinvigorate Pakistan’s economy,” he said.
Published in The Express Tribune, September 12th, 2014.
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Complement to the senior Vice Chairman on the land mark event of ABAD. HBFC, the Central Bank should see the Chinese model as cost of houses/apartment in China being reduced and brought down to 30%. We can achieve the same by reducing the cost of borrowing for the housing sector, the availability of funds. Construction technology has changed tremendously and we have to learn the technology to bring our costs to an affordable level. Even for FDI in the housing sector the investors as Chinese for example will come with their own low cost technology/techniques and given us the best results. China has bring revolution in the world of housing, and we must take advantage of it. Possibly inviting Chinese groups for investments in the low cost housing secor.