Karachi: The contribution of banking sector in the house building has continued to show a declining trend as loans issued by banks, DFIs and House Building Finance Corporation Ltd (HBFCL) plunged by 10 percent to Rs. 58.55 billion in first quarter of 2012
According to State Bank of Pakistan (SBP) “Quarterly Housing Finance Review”, the financial sector lending for house construction was recorded at Rs. 65.43 billion as on March 31, 2011.
The total number of outstanding borrowers has also decreased from 94,497 to 89,261 since March 31, 2011, showing a fall of 5.54 percent which was 2.34 percent decline when compared to December 31, 2011, the review stated.
Approximately 766 new borrowers were extended house finance during the quarter (Jan-Mar, 2012), accounting for Rs 1.61 billion of new disbursements.
HBFCL accounted for 47.78 percent of these new borrowers and contributed 18.36 percent of the new disbursements equivalent to Rs.296 million.
The financing for outright purchase continued to dominate financing for construction and renovation by comprising almost 56 percent share in gross outstanding portfolio.
The outstanding portfolio for construction and renovation was 32 percent and 11 percent respectively.
NPLs in house financing
The non-performing loans have increased from Rs. 18.93 billion (March 31, 2011) to Rs. 20.12 billion (March 31, 2012); a 6.3 percent increase over the year.
The stock of NPLs as on December 31, 2011 was Rs. 19.07 billion. However; this rise in NPLs is not unique to housing finance and is only depicting the overall increase in NPLs of all sectors witnessed in the banking industry during the past year.
The overall market share (based on gross outstanding) of commercial banks (excluding DFIs) has shown slightest change of 1 percent decrease since last year, as 78 percent.
In comparison to the quarter ending Jan-Mar 2011, there was a decline of 1 percent in overall market share of commercial banks (excluding DFIs).
The share of conventional and Islamic banks
Within commercial banks, the share of Public sector banks in the total outstanding decreased by 1 percent from 14 percent to 13 percent and the share of HBFCL in the total outstanding increased by 1 percent from 21 percent to 22 percent over the year. The share of Private Sector Banks, Foreign Banks & Islamic Banks remained unchanged as 49 percent, 1 percent and 15 percent respectively over the year.
Analysis of Loan Variables adopted by Banks/DFIs & HBFCL
The overall weighted average interest rate was 15.8 percent at the end of the current quarter whereas the highest weighted average profit rate was reported by Foreign Banks 17 percent, followed by Islamic banks 16.2 percent, HBFCL 16 percent, Private Banks 15.3, while public sector banks average came to 14 percent.
Average maturity periods Average maturity period of outstanding loans as on March 31, the average loan size for HBFCL is reported to be Rs.2.1 million for the reporting quarter. Private Banks reported an average financing size of 4.2 million, Foreign Banks as well as Islamic Banks Rs. 3.7 million, Public sector banks 2.1 million.
The housing finance market is still inclined towards lending to high income groups.The share of Conventional Banking (excluding HBFCL), Islamic Banking Industry and HBFCL in the total outstanding was 57 percent, 21 percent and 22 percent respectively on March 31, 2012.
IBDs (12 windows) and Islamic banks (05 banks) have 70 percent and 30 percent share (remained unchanged over the year) in housing finance portfolio of Islamic Banking Industry, which shows that conventional banks also consider the Islamic mode of financing an important part of their business strategy.