AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

Sixty one percent of fresh house loan disbursements in Pakistan during the year ended June 2015 were made by Islamic bankers sitting at Islamic banks or at the Islamic windows of conventional banks. While we let that sink in, let it also be known that the fiscal year 2015 was the first year since FY08 when the gross outstanding amount of housing loans actually grew.

The recently released Quarterly House Finance Review by the State Bank of Pakistan (SBP) shows that it was essentially the second half of the fiscal year 2015, specifically the last quarter that saw the growth in disbursements. Data show that Mar-Jun 2015 quarter saw outstanding loan amount grew by Rs4.7 billion, as against a total growth of Rs6.5 billion in the whole of FY15.

House finance had started falling right after the great crisis of 2008, when it had peaked at around Rs82 billion in June 2008. But since then it had been a downward journey as non-performing loans (NPLs) soared amid rising interest rates. The easing of interest rates hasn't brought bankers back to the mortgage counter.

The one exception to that, however, was Islamic finance, which as the charts here show continued to grow manifolds. Today, Islamic house finance makes up about 30 percent of the total house finance market, from 8 percent in June 2008.

The interesting bit is that the growth in Islamic finance doesn't seem to come about only because conventional bankers left a space in the market. That may be so, but the fact that the share of Islamic banks as against the Islamic windows or divisions of conventional banks continues to rise within the Islamic house finance segment suggests that much can be attributed to the efforts and strategy of Islamic banks. Industry sources add that consumers find Islamic house finance instruments attractive because of the co-ownership nature of the contract instead of borrowing and lending. But while FY15 has indeed been a better year for housing finance, thanks to persistent growth in Islamic house finance, the numbers above speak for themselves as to how small be Pakistan's house finance market.

Even with the 13 percent growth in FY15, Pakistan's mortgage-to-GDP ratio stood at 0.49 percent as of June 30, 2015. In contrast, that number in India has grown from 2.5 percent in 2001 to about 9 percent in 2015. Most other countries in the region are north of 10 percent; China for instance is at 20 percent, whereas Malaysia and Korea are north 30 percent.

Housing sector in Pakistan is still plagued by inadequate long term finance, and this column would like to remind the Finance Ministry to release the housing policy upon which it has been sitting since December 2013. Not only would it bring about a paradigm shift in Pakistan's commodity producing economy (See BR Research column: A new game changer in town!, June 2, 2015), but also kick start a fresh wave of growth in the banking sector, provided they are prudent about it as are Islamic banks with their low NPLs.

gaph-1(1)

gaph-2(1)

gaph-3(1)

gaph-4(1)

Comments

Comments are closed.