Quarter-on-quarter: Housing finance reaches Rs52.9 billion at September-end

Kazim Alam

KARACHI: Gross outstanding housing finance of all banks and development finance institutions (DFIs) registered a growth for the third consecutive quarter, according to the latest housing data released by the State Bank of Pakistan (SBP).

It amounted to Rs52.9 billion at the end of September 2014, which is up Rs268.2 million or 0.51% on a quarter-on-quarter basis.

“Housing finance has started picking up after 2008. It is expected that the SBP’s stance of reducing policy rate will further help in enhancing affordability and demand for housing finance in Pakistan,” the SBP wrote in its brief commentary on the housing data.

House Building Finance Company (HBFC), which is the only housing bank operating in Pakistan, is the largest market player in terms of gross outstanding portfolio with a share of 24%.

Other than HBFC and Islamic banks, gross outstanding of the banking sector decreased on a quarter-on-quarter basis. Gross outstanding housing finance of Islamic banks showed an increase of 3.78% from the preceding quarter to reach Rs14.28 billion.

The increase in HBFC’s gross outstanding housing finance was 0.7% over the same period.

Data shows a large portion of HBFC’s portfolio consists of small-sized loans of up to Rs1 million as opposed to other institutions whose portfolios seem tilted towards bigger loans of Rs5 million and above.

Speaking to The Express Tribune, Association of Builders and Developers of Pakistan (ABAD) former senior vice chairman Saleem Kassim Patel said the stock of housing finance as a percentage of the size of economy is ‘embarrassingly low’.

“Instead of Rs52.9 billion, housing finance should be at least Rs500 billion in Pakistan. Its share in other economies of the region is 5% or above. Banks must allocate at least 5% of their total annual disbursements to the housing sector,” Patel said.

The mortgage-to-GDP ratio was 0.45% at the end of the third quarter of 2014.

Referring to the moratorium on new gas connections to high-rise residential buildings, he said investors are holding back hundreds of billions of investment because of bad policies.

“Investors seem more willing to put their money into the construction market because of the general economic recovery. The government must take advantage of the situation and do away with bad policies that discourage investors,” he added.

Non-performing loans of the housing sector went up 1.75% during the quarter to reach Rs15.93 billion. At the end of the July-September quarter, HBFC’s share in total sector-wide NPLs was 40%, SBP data shows.

Published in The Express Tribune, January 27th,  2015.

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