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Home loans grow for 11th quarter in a row

KARACHI: The volume of outstanding home loans increased for the 11th consecutive quarter in July-Sept 2016, according to data released by the State Bank of Pakistan (SBP) on Friday.

Housing finance extended by all banks and development finance institutions (DFIs) amounted to Rs65.8 billion on Sept 30, up 13.5 per cent from a year ago.

The steady rise in housing finance since the beginning of 2014 bodes well for economic growth. More loans to purchase and build residential units help grow the housing sector, which leads to the expansion in 40 allied industries.

As for fresh disbursements, banks and DFIs extended new loans of Rs4.1bn to 851 borrowers in July-Sept, down 12.7pc from the same three-month period a year ago.

State-owned House Building Finance Company (HBFC) holds the largest share (22pc) in terms of outstanding home loans. It accounted for 42pc of the new borrowers in the quarter under review while its share in new disbursements remained 14.5pc with Rs597 million. Category-wise, Islamic banks remained the largest players with 39pc share in outstanding loans.

In contrast with regional economies, housing finance remains unusually low in Pakistan in spite of notable growth in the last two years. The mortgage-to-GDP ratio was only 0.5pc at the end of September last year, nominally higher than 0.48pc recorded a year ago.

Non-performing loans (NPLs) within the housing sector decreased 20pc year-on-year to Rs11.3bn. The share of HBFC in overall NPLs declined about 18pc on an annual basis. Yet around 28pc of HBFC’s outstanding loans were still categorised as NPLs.

Data shows public-sector banks charged a higher interest rate than the industry average in July-Sept. The overall weighted average markup rate was 9.8pc while public-sector banks charged 10.6pc. HBFC’s rate was 9.9pc while that of Islamic banks remained 10.5pc.

The average size of loans disbursed during the quarter under review was Rs4.7m. While private banks reported an average financing size of Rs7.2m, the average loan size for HBFC was only Rs1.7m. This shows the state-owned housing bank mostly caters to customers with relatively modest incomes.

As opposed to businesspeople, the salaried class relies more on housing finance, SBP data shows. In July-Sept, 68.5pc of loan disbursements were to the borrowers who declared ‘salary’ as their primary source of income. In contrast, 27.4pc disbursements were to borrowers with the primary source of income declared as ‘business’. ‘Self-employed’ borrowers received 4pc of disbursements in the quarter under review.

courtesy : dawn news

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