This Presentation based on House Building Finance Corporation Pakistan, “Products Launched and Conceptualized during (2005 to 2007).
HBFC did not have a defined business focus. Its real potential for “small & medium housing for low and medium income population” in the housing sector of Pakistan was being marginally utilized.
It needed a new vision, mission, and business approach in view of commercial banks’ entry into the mortgage market in 2001.
Features of GAS Flexi Launched in 2007.
Based on the Diminishing Musharika concept.
HBFC and Customer to enter into a Musharika Agreement for the purpose of Purchase / Renovation /Construction of a property.
Joint ownership is to be created in the property between HBFC & customer by virtue of the Musharika agreement
HBFC’s share is to be divided into a number of units and given to the Customer on rent
Rental is to be calculated on a KIBOR + spread basis.
The rental rate is to be changed every 1 to 5 years, depending upon the prevailing benchmark rate.
The customer to agree to promise to purchase HBFC’s share (units) on a monthly basis during the tenor of the transaction and will eventually become the owner of the property.
The Customer to have the option to select from two repayment plans i.e. fixed repayment plan and variable repayment plan (No more available)
The rental amount is to be adjusted according to the HBFC’s share of outstanding units( outstanding principal) remaining in the property.
Each instalment consists of three components i.e.
Monthly rent calculated on outstanding principal;
Cost of units purchased by the customer;
Insurance Premium/Takaful contribution.
The purchase of additional units (early repayment of installments) was not allowed for three years. However, termination within the “lock-up period” was allowed subject to payment of a prepayment penalty as decided by ALCO.
After Three years, early purchase of HBFC units was allowed with a prepayment penalty.
Flexible Financing Tenure 3 to 20 years
HBFC Investment Ratio is up to 80% of the Forced sale value (FSV) of the property in case of Purchase & BTF and up to 60% of the projected cost in case of construction.
Applicant’s maximum Debt burden ratio is not to exceed the range of 40% to 50% depending upon various income slabs.
(DBR) up to 40% of the net monthly/verifiable take-home income for non-salaried persons and Agriculturist;
Up to 50% of the net monthly/verifiable take-home income for regular employees of Government/Semi-Government/Pubic & Private Limited Companies.
In cases, where one co-applicant is salaried and the other is a non-salaried person, a mean of the two percentages i.e. (40%+50%) 90%/2 = 45% of the joint income should be considered for the calculation of repayment capacity.
Low and middle-income borrowers generally face cash constraints for timely repayment of loans and unwillingly go into default
Askari MasterCard had joined hands with HBFC to issue co-branded credit cards for HBFC clients.
The arrangement allowed HBFC to facilitate its borrowers by using Askari Master Cards for payment of installments through a “blocked Credit Card facility” for up to three monthly installments.
The facility provided 45 days interest-free funding to the borrowers and was secured by a second charge on borrowers’ assets.
The credit card company was to follow their default client in their normal process.
Service Representatives Offices:
• Through this innovative outreach Programme HBFC had increased its presence from 50 cities to 85 cities by 2007. The future plan was to extend this network to about 150 cities by the year 2010.
• These were cost-effective and self-sufficient offices with very limited overhead burden on HBFC
A proactive rather than reactive approach to HBFC’s clientele was adopted
The HBFC on the wheel was connected through broadband internet connectivity and offered the normal range of services.
Mobile Service Vans were equipped with
>Computer linked to HO Server
>Printer and Scanner
>4 work stations
>Experienced staff
Digital Archiving
Being 54 years old HBFC had a large storage of collection of memos, Account files, and above all title documents etc.
The manner in which files/documents were being maintained and preserved at HBFC carried a lot of risk in case of any disaster like fire, earthquake, etc.
About 1 million pages were archived out of approximately 5.4 million, which included Property docs, Loan Files, Personal Files, etc.
Archiving stations were functional at H.O. and all zonal offices.