Mortgage-to-GDP ratio declines to 0.45%

Gross outstanding housing finance amounts to Rs52.7b.

KARACHI: The mortgage to gross domestic product (GDP) ratio declined to 0.45% at the end of June from 0.5% a year ago, latest data released by the State Bank of Pakistan (SBP) shows.

Defined as the share of total mortgages in the economy, the mortgage to GDP ratio is a key indicator of the state of housing finance in a country.

According to the SBP Housing Finance Quarterly Review for April-June released on Wednesday, the gross outstanding housing finance in Pakistan amounted to Rs52.7 billion at the end of June, which is up Rs0.4 billion or 0.79% from a year ago.



Twenty-seven commercial banks, House Building Finance Company (HBFC) and a microfinance bank are part of the country’s housing finance market. Commercial banks accounted for 76%, or Rs40.1 billion, of the total outstanding housing finance at the end of the last fiscal year.

The stake of private banks, Islamic banks, public-sector banks and foreign banks in the country’s housing finance market was 37.7%, 26.1%, 11.5% and 0.5%, respectively.

The share of HBFC, which is the country’s only housing bank that is also state-owned, in the housing finance market was 23.5%, or Rs12.4 billion, at the end of June. It has come down by 0.9% compared to a year ago, the SBP data reveals.

“The data confirms that the primary housing finance market in Pakistan is at a nascent stage, which needs to be developed by creating enabling environment and initiatives by public and private sectors,” the SBP said in its commentary on the latest data.

The market share of Islamic banks grew bigger than that of HBFC in terms of gross outstanding housing finance in the last quarter of 2013-14.

Non-performing loans (NPLs) decreased by around 11% on a year-on-year basis to reach Rs15.6 billion at the end of June.

NPLs of HBFC came down 9.8%, although their share in housing finance remains the largest after that of foreign banks. The SBP said 51% of HBFC’s total outstanding loans constitute NPLs while its percentage share in the industry’s bad loans stands at 40.5%.

Fresh disbursements during April-June amounted to Rs3.4 billion, as 742 borrowers received housing finance in the last quarter of 2013-14. The largest chunk of disbursements in the quarter came from Islamic banks with Rs2.2 billion. They were followed by private banks (Rs560 million) and HBFC (Rs541 million).

The overall weighted average mark-up rate was 13.2% at the end of the quarter while the highest weighted average profit rate was reported at 14% by HBFC, the SBP said.

The average loan size for disbursements made during the quarter ending June 30 was Rs5 million. However, the average loan size for HBFC was Rs2.2 million while private banks reported an average financing size of Rs8.6 million during April-June.

Published in The Express Tribune, December 11^th,  2014.

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