PAKISTAN HOUSING FINANCE SECTOR

Introduction

The “Pakistan Housing Finance Sector: Challenges and Opportunities” presentation by Kamran Shehzad, Deputy Governor of the State Bank of Pakistan, provides an in-depth analysis of the housing finance landscape in Pakistan. This comprehensive overview addresses the current state, challenges, and strategic initiatives aimed at enhancing the housing finance sector.​Affordable Settlements Center

Geographical and Demographic Context

Pakistan’s strategic location in South Asia, bordered by China to the north, the Arabian Sea to the south, India to the east, and Afghanistan and Iran to the west, positions it as a significant player in the region. As of 2005, the country’s population was approximately 161.15 million, with a density of 206 individuals per square kilometer. Urban dwellers constitute 35% of the total populace, and the population growth rate stands at 2.41%. These demographic factors contribute to a substantial housing backlog of 7 million units, which increases by 300,000 units annually. The room density is 3.5 persons per room, and the per capita income is $1,027. Notably, housing finance accounts for a mere 0.7% of the Gross Domestic Product (GDP).​

Current State of Housing Finance

The housing finance sector in Pakistan has experienced notable growth over recent years. The gross outstanding in housing finance has seen a steady increase, with commercial banks and the House Building Finance Corporation (HBFC) playing pivotal roles. The number of borrowers has also risen, indicating a growing demand for housing finance solutions. However, the Herfindahl Concentration Index suggests a need for diversification to reduce market concentration and enhance competitiveness.​Affordable Settlements Center

Strategic Initiatives by the State Bank of Pakistan

To address the challenges in the housing finance sector, the State Bank of Pakistan (SBP) has undertaken several strategic initiatives:​

1. Establishment of the Housing Advisory Group (HAG): The HAG was formed to identify impediments in the growth of housing finance and propose key recommendations. These recommendations have been disseminated to relevant stakeholders for implementation.​

2. Capacity Building of Mortgage Bankers: In collaboration with the International Finance Corporation (IFC), the SBP has launched initiatives to train approximately 200 bankers in the mortgage business, enhancing the industry’s human resource capabilities.​

3. Collaborative Initiatives with the World Bank: Joint efforts with the World Bank include the establishment of a Mortgage Refinance Company (MRC), restructuring of the HBFC Ltd., and the creation of a real estate market observatory to monitor and analyze market trends.​

4. Strengthening the Credit Information Bureau (CIB): The SBP has upgraded the CIB to an electronic platform (e-CIB), improving the efficiency and accessibility of credit information.​

Also Read: PAKISTAN: NATION WIDE PROVISION OF HOUSING FINANCE

HOUSING DEMAND ACROSS INCOME GROUPS IN PAKISTAN