Shareholders Agreement of Pakistan Mortgage Refinance Company (PMRC) was signed in Karachi on Saturday. The Government of Pakistan holds 49 percent while private sector banks hold majority 51 percent stake in the Company. The creation of PMRC marks an important milestone in the Government of Pakistan’s objective to improve access to housing finance, particularly to the middle and low-income group of borrowers who are in need of access to long-term housing finance with stable and fixed rates not subject to the vagaries of interest rate fluctuations.
PMRC’s shareholders comprise the Government of Pakistan- Ministry of Finance, Habib Bank Limited, United Bank Limited, National Bank of Pakistan, Askari Commercial Bank Limited, Allied Bank Limited, Bank Al Falah, Bank Al Habib and House Building Finance Company.
Speaking at the signing ceremony of the shareholders, Mr. Jameel Ahmed – Deputy Governor of State Bank of Pakistan said that Pakistan faces a shortage of 10 million housing units which needs to be addressed on a priority basis. Central bank’s vision 2020 clearly prioritizes housing, agriculture and SMEs for development.
He noted that supply and demand side issues are getting complex which give rise to the irregular settlements in the country. In Karachi alone there are 562 kachi abadies (irregular settlements) and such settlements are becoming breeding ground of crimes, he said adding that PMRC can play vital role in the promotion of local housing finance market.
Mr. Rehmat Ali Hasnie, Chairman Board of Directors of PMRC said that the private-public partnership is an achievement by which the shortage of affordable housing finance in Pakistan can be addressed by PMRC by bridging the gap between the bond market and low middle income households desirous of seeking financing for home ownership.” PMRC is a private-public partnership with the private sector’s contribution of 51%. The contribution and the efforts put in by all the shareholders have been phenomenal which has led to the culmination of a noble idea of PMRC into reality”.
The Gross Outstanding Housing Finance Portfolio as at December 2013 was Rs.51 Billion and it has increased to about Rs. 80 Billion in December 2017, depicting an increasing trend. Mr. Hasnie said that there is a great potential in this industry and needs to be tapped. In this regard, PMRC will provide innovative, viable and market based financial products for the development of housing finance market in Pakistan.
Speaking on the occasion Mr. N. K. Rupan, Managing Director and CEO, PMRC said that country faces shortage of houses and the demand is growing at the rate of 400,000 to 700,000 houses per year mainly in the middle and low income segments.
The Government’s policy is to promote home ownership by increasing accessibility and affordability of housing loans particularly by lower and middle income group.
He said that Primary Mortgage lenders (PML) are reluctant to grant housing loans, particularly to middle and low income groups because they do not have long term funds at fixed rate. Furthermore, housing loans are long-term illiquid assets. PMLs will be encouraged to originate more mortgage loans if they can source medium to long term funds to reduce their maturity mismatches and liquidity risk.
He further added that the role of PMRC is to develop the primary mortgage market by providing medium to long-term funding at fixed rates to the lenders thus, providing the lenders with risk management tools to alleviate the lenders’ maturity mismatch and liquidity risks. PMRC will also develop the local corporate bond market, particularly the fixed rate bond market.
Ms. Namous Zaheer, representative of World Bank, said that there is a significant market gap across all segments of the population for housing finance. The creation of PMRC marks an important step in achieving the Government of Pakistan’s objective to improve access to housing finance in the country. In this regard, the World Bank’s Board has approved a US$ 140 million credit line for PMRC. She said that another objective of the World Bank’s line of credit to PMRC is to enable women to increase their ownership of house as presently only 2 percent women own houses in Pakistan.
Saeed Ahmed, President of National Bank of Pakistan said that mortgage financing was 1.5 percent but it has declined to only 0.5 percent of GDP. “Only low cost housing schemes can play role to reduce the demand for houses”, He said adding that the shortage of houses cannot be fulfilled through conventional means.