This document discusses housing finance in Pakistan. It provides background information on Pakistan's economy and demographics. It then examines the country's housing sector, including the large gap between housing demand and supply, market segmentation, and structural challenges like weak property rights. The document outlines the evolution of Pakistan's housing finance system and requirements for financing low-income housing developments. It argues that innovative approaches are needed to close Pakistan's massive housing shortage, including improved developer financing, credit lines, guarantee schemes, and public-private partnerships.

1. Muhammad Adeel Khan
Development Finance-Final Project (MOOC)
Country: Pakistan
Housing Finance in Pakistan

2. 2
 Basic information about Pakistan
 Position of Housing sector in Pakistan
 Demand and Market Segmentation of Housing sector
 Problems in Housing sector development
 Evolution of Housing finance
 Requirements for low income housing
 Challenges and opportunities
 Way forward
Scope

3. Pakistan is a lower middle income country
3
General Facts
• Size: 796,095 Sq. km.
• Nearly 200 million inhabitants
• 100 million inhabitants are below the
age of 25 years
Economic Facts
• Currency: Pak. Rupee.
• GDP Per Capita: US$ 1,145
Basic Facts

4. 4
Source: Access to Finance Survey
The
Formally
Served
The Financially Excluded
The Financial Market Development Frontiers
The Informally Served
11% 1% 32% 56%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
%
Financial Inclusion / Exclusion

5.  Weak property rights due to inefficient legal framework
and land information systems
 Improper implementation of foreclosure laws; outdated
building and zoning regulations
 Embryonic property development framework
o Poor master planning and governance issues at
national and local government levels
o Multiple institutions and administrative procedures
o Restrictive building codes
 Unorganized real estate agencies
 Unreliable utility connections Emerging building industry
 Lack of housing finance particularly developer finance
 Rising land prices and rapid urbanization
5
Weak institutional support and economic fundamentals, coupled
with high transaction cost, the sector faces a number of Structural
Challenges
Key Housing Industry Problems

6. There is a large gap in Housing market in Pakistan
 World Bank estimated a shortfall of 8 million housing units in Pakistan
in 2009
 According to estimates the annual incremental demand is 600,000
units, of which 50% is met by the private/public investment
The ever widening housing demand and supply gap requires huge
investment
 Annual Housing needs come to almost 1.1 million
 At an average price of Rs. 3 million per unit, total funding requirement
is estimated at Rs 3.3 trillion per year (around US$ 35 billion)
 Assuming only 10% housing needs as effective demand, total funding
needs are Rs.330 billion (around US$3.5 billion)
The situation is compounded by increased urbanization and
changed demographics
6
Current position of Housing sector in Pakistan

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• Financial Institutions involved in Housing
Finance
• Commercial Banks
• Islamic Banks
• DFIs
• MFBs
• Islamic Banking Branches
• Product Range available:
• Construction
• Outright Purchase
• Renovation
Diversity in Housing Finance Market

8. 8
Ist HFC
HBFC National Housing
Policy 2001
Islamic
Banks
Commercial
Banks
1952 2001
1992
2007
2003
2004
HAG
Recommendation
s
2006
Infrastructure & Housing
Finance Department MFBs
2008
Evolution of Housing Finance

9. 9
• Financing model should be developed to facilitate large-scale
builders/developers’ access to formal financial sector.
Guidelines should be issued to banks/DFIs for providing
financing to builders/developers
• Key stakeholders including the Association of the Builders and
Developers (ABAD), Investment Bankers, Association of
Mortgage bankers (AMB) and Rating Agency should be
consulted
• Key challenges include:
o Corporatization of large-scale developers
o Bankable financial statements
o Credit rating (Entity and Instrument Ratings)
o Fiscal issues relating to Book Value and Market Value,
declared income and wealth etc.
Given the huge housing gap, the industry needs to find
solutions for large scale developer financing particularly for
the low income housing
Requirements for low income housing

10.  Adopting Innovative Approaches to Affordable
Housing
 Exploration of Credit lines for institutions offering
Housing Finance
 Arranging a Credit Guarantee Scheme for low-
Income Housing Finance
 Promotion of Microfinance Banks to support
borrowers with undocumented income
 Strengthening the Regulatory Framework
 Arrange public / private financing for housing
development
 More development funds should be allocated to
housing development
10
Way Forward

11. Thank You