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ISLAMABAD: IFC, a member of the World Bank Group, is making an equity investment of up to Rs 500 million (about $3.2 million) in Pakistan Mortgage Refinance Company Limited (PMRC), to catalyze affordable mortgage financing to help to address a critical gap in affordable housing.

With almost half of Pakistan's urban families living in substandard housing, and the number of people living in towns and cities expected to double between 2030 and 2040, Pakistan is facing a high demand for affordable housing. The current housing deficit in Pakistan stands at 10 million units and is expected to grow by 700,000 units per year. Despite the growing demand for housing, Pakistan's level of mortgage lending - 0.3 percent - which is significantly far lower than South Asia's average of 3.4 percent.

IFC's support to PMRC will help increase the overall availability of mortgage financing for homeowners. At present, the sector's growth is hindered by an acute absence of long-term, fixed rate funding.

This investment will allow primary mortgage lenders (PMLs) to offer new mortgages, with a focus on the frontier and under-served regions such as Khyber Pakhtunkhwa (KPK), Balochistan, and Federally Administered Tribal Areas (FATA) and is expected to serve as a model for the future.

"I would like to thank IFC for their support and investment in PMRC. IFC's support is timely, especially with the economic slowdown further exacerbated by the COVID-19 pandemic. IFC's presence as a shareholder will inspire investor confidence in PMRC's potential to support the growth of mortgage financing in Pakistan," said Mudassir H Khan, PMRCL Managing Director & CEO. "IFC's extensive global knowledge and expertise from establishing mortgage refinance companies in other emerging markets will help guide the company's business strategy."

Through PMRC, IFC will help deepen the local debt capital markets and standardize underwriting for mortgage lending, which is essential for the market to grow.

"This marks IFC's first investment in Pakistan's housing sector and comes after extensive collaboration with the government of Pakistan and the World Bank to help meet the country's critical need for affordable housing," said Nadeem A Siddiqui, IFC Senior Country Manager for Pakistan. "It will help open up financing for affordable housing for Pakistan's middle and lower-income families and can contribute to stimulating the economy at a time when growth has been severely impacted. It will also help spur private sector participation in mortgage finance, effectively creating a new market and model to promote competitiveness, growth and inclusion in the country."

IFC's investment comprises an equity investment in common shares of PMRC for a maximum stake of about 12 percent in the company. Half of IFC's investment will be supported by the International Development Association's Private Sector Window (IDA PSW) Blended Finance Facility, which will help to focus growing mortgage refinanced loans in the underserved provinces of KPK, FATA and Balochistan. This will be IFC's first co-investment supported by the IDA-PSW in Pakistan.

The project follows extensive collaboration between the WB and IFC working with the government of Pakistan and the banking regulator, the State Bank of Pakistan on developing an end to end solution - from demand to supply - to develop the underdeveloped housing sector in Pakistan.

IFC helped set up and operationalize PMRC and develop its business plan through which the company was able to mobilize its current private sector investors. This project complements the WB's up to $145 million Pakistan Housing Finance project, which included both financial and technical support to PMRC and capacity building for the government for regulatory reforms of the housing market.

Copyright Business Recorder, 2020