SBP asked to start mortgage financing to develop housing sector

General Lahore

LAHORE: Though the real estate is an important sector for country’s economy, employing over 5 per cent of the labour force directly in construction and much more in related industries, yet a key hindrance to the development of the sector is the availability of housing finance, real estate industry experts said.

According to them, presently total value of home loans in Pak banking sector is Rs50 billion or just 1.5 per cent of all loans outstanding, as banks are reluctant to enter housing finance business despite the fact that the real estate and the construction industry in Pakistan is worth around Rs500 billion.

Noted real estate industry expert and managing director of Zaitoon Group, Mian Ayaz Anwar, said that with a recent downward revision in the discount rate, banks now like to venture in consumer financing again, particularly regarding car financing and personal financing. He said that banks are unwilling to re-enter into housing finance, especially, in the absence of effective foreclosure laws, he said.

Banks are worried about the sustainability of monetary policy by the reduction of interest rates. There is a fear among bankers that in case of any agreement for loans, the International Monetary Fund IMF and other donor agencies may influence the interest rate as done in the past.

To overcome the lack of housing finance, the State Bank of Pakistan SBP should take immediate steps to introduce investment bonds to generate liquidity for mortgage financing at affordable rate to develop housing sector that has potential to push GDP up to 9 per cent, he said.
The endeavours for developing housing sector at the government level would not only provide homes to the people of low income group but also gear up economic activities in 44 related industries, said Managing Director Zaitoon Group.

Presently, there is a shortfall of two million houses in the provincial metropolis, he said and stressed the need for developing affordable housing projects. A project like New Lahore City would help bridge gap between the supply and demand for houses for the people having low incomes, he said.
Mian Ayaz Anwar, however, suggested the government to strictly monitor the speculators/investors’ activities and impose a condition under which one can buy only one house across the country. The computerized national identity card could be instrumental in this regard to keep the houses’ price at certain level, he added. He expressed optimism regarding Pakistan’s economic outlook and said the private sector which was getting strength gradually can put the country’s economy on track.

He was of the view that the industry was restricted due to which about 44 related industries which could significantly contribute to the economy were adversely affected.

He said that the major reason, restricting the industry, is lack of mortgage financing facility while people of low income group have no means to purchase home. They are forced to live in rental homes which obliviously do not generate liquidity, he maintained.