This was stated by the State Bank Governor Salim Raza on Saturday in a seminar on housing sector organised by the Association of Builders and Developers of Pakistan (ABAD).
Shortage of houses has not only increased the volume of backlog but it increased the prices unexpectedly very high going beyond the reach of middle class while it also minimised its share in the economic growth.
A rough estimate shows that there is a backlog of 8 million housing units in the country which is rising with the addition of 300,000 housing units each year.
After the emergence of commercial banks in mortgage business, the housing finance portfolio grew considerably from Rs37 billion in 2004 to Rs84 billion at the end of 2008. In 2009, the housing sector once again witnessed reversal as housing finance portfolio experienced a dip of 11 per cent and now stands at Rs74 billion.
Mr Raza said that discussions were underway with the World Bank for seeking financial support both in the form of equity as well as credit line for the MRC.
“We are also in the process of seeking equity commitments from commercial banks, being the primary mortgage lenders,” he said and added that MRC, apart from acting as a liquidity company for primary mortgage lenders, would also facilitate development of private debt market and open-up investment opportunities for long-term institutional investors, such as pension and provident funds, insurance companies etc.
He said the central bank had embarked upon a number of key initiatives to strengthen the market-based housing finance mechanism for the development of housing sector.
“The State Bank is fully cognizant of all issues and constraints surrounding the housing sector and it is taking a vanguard position for providing institutional arrangements and reforms for promotion of housing finance,” he added.The SBP governor said that the refinance facility would assist in improving liquidity of the financial system and enable banks and housing finance companies to prudently match maturity profile of their assets and liabilities.
“It will also pave the way for primary mortgage lenders to diversify their product base by exploring fixed rate or hybrid models of mortgages,” he added.
To addressing issues of non-availability of complete and reliable information on housing and housing finance to consumers, the housing industry and other stakeholders for investments or financing decisions, SBP and the World Bank have planned to collectively work towards the establishment of a housing observatory.
“The Ministry of Finance has already issued a formal expression of interest to the World Bank in this regard,” he disclosed.
“Considering the significance of market intelligence, we have stressed upon the commercial banks to enrich the housing finance sections of their websites to ensure that potential customers are well informed about their products and policies,” he said
He said added that the setting up of housing and housing finance information portal at industry level is also under consideration with features like relevant laws and regulations, market or business trends, housing demand and supply position and mortgage locator.
Mr Raza also talked about the capacity building initiative of SBP, which was initiated under the Cooperation Agreement signed between the SBP and IFC with a view to developing human capital that will play a critical role in ensuring sustainability of housing finance.
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