KARACHI: Housing and construction finance witnessed historic 36 per cent growth during 2020-21, the State Bank of Pakistan (SBP) said on Tuesday.

In a joint statement, the SBP and Pakistan Banks’ Association (PBA) explained their efforts to bring growth in housing finance and creating awareness about the best use of the offers being introduced by the government, SBP and banks.

Housing and construction finance has been progressing significantly and a momentum in housing and construction finance is building up, the statement said.

“Banks housing and construction finance portfolio has increased from Rs148 billion by the end of June 2020 to Rs202bn in March 2021. This represents a growth of Rs54bn, or 36pc, in three quarters of FY21 compared to a stagnant position in the same period last year,” it said.

Activity under Mera Pakistan, Mera Ghar scheme picking up

“Such growth in housing and construction finance in such a period has never been witnessed in the country’s history previously,” said the statement. Banks are required to increase their housing and construction finance portfolios to at least 5pc of their private sector advances by end December 2021.

However, the construction industry finds this figure of Rs54bn financing a peanut for the sector and claims growth is extremely poor in cities like Karachi.

“This amount of Rs54bn is nothing for the construction industry. The sector needs trillions of rupees to see a change or bring a real growth in the economy,” said Kamran Azim, a private sector builder and developer with over 25 years of experience.

PBA has also been playing a very active role in the promotion of Mera Pakistan, Mera Ghar Housing Finance Scheme.

“It is very close to establishing a single call centre to address applicant’s questions and to guide them towards their nearest branches to submit application for home loans,” the statement added.

Overall financing to the housing and construction sector by banks is likely to increase further significantly as mortgage finance activity under the Mera Pakistan, Mera Ghar scheme is picking up pace, said the SBP.

As of April 20, FY21 banks have received applications for financing of more than Rs52bn from the general public under this scheme.

Of these, the banks have approved financing of more than Rs15bn to the applicants while the remaining applications are at different stages of the evaluation and approval process, it added.

In order to address complaints, the SBP has established a comprehensive complaint resolution mechanism which comprises of an internet portal supported by a network of State Bank and commercial bank staff.

The IT portal is live for registration of complaints by applicants who face any difficulty in obtaining loans.

A significant number of Pakistanis who currently do not own a house and are eligible for financing under the Mera Pakistan, Mera Ghar scheme face difficulties in providing documentary evidence of regular sources of income to prove their ability to repay.

To address this issue, the SBP is coordinating with banks to develop a mechanism whereby income proxies, based on demonstrated expenses like rent payments or utility bills, could be used for credit evaluation and income assessment.

The PBA is engaged with internationally renowned experts to develop scoring models in this regard in the coming months.

Banks have already developed initial judgmental income proxy model to accommodate applicants with informal incomes till the time expert’s developed scoring models are implemented.

Published in Dawn, April 28th, 2021