December 12, 2002	Thursday	Shawwal 7, 1423

KARACHI, Dec 11: Prime Minister’s Adviser on Finance and Economic Affairs Shaukat Aziz estimated on Wednesday a backlog of 5.38 million housing units in the country which represent a big demand for housing finance and calls for an active role of banks.

Inaugurating a two-day Housing Finance Conference organized by the State Bank of Pakistan here on Wednesday, the adviser estimated total housing finance demand close to Rs68 billion if commercial banks design products for construction of at least half-a-million housing units every year in the country.

As many as about 150 participants are attending the two-day conference. They are drawn from international financial institutions, foreign and Pakistani banks, government institutions and private sector organizations.

Shaukat Aziz gave a simple arithmetic formula to substantiate his estimate. He said that if a single housing unit’s average cost is Rs500,000 and 50 per cent is the self-financing ratio, the total housing finance demand is close to Rs68 billion as against present annual provision of Rs3 to Rs4 billion.

“Inertia”, he remarked while blaming the banks for ignoring the vital housing finance in their operations, which has deprived the constructors and developers of funds and banks of profits which they could have earned.

He quoted the 1998 population and housing census, which showed that there were 19.3 million housing units in the country, of which 67.7 per cent were in rural areas and 32.3 per cent in urban areas.

By 1998, he said, the backlog was estimated at 4.3 million housing units while the annual requirement was 570,000 housing units. The annual shortfall of the requirement is estimated at 270,000 units.

This backlog of housing shortfall can be met in the next 20 years if the overall housing construction activity is raised to half-a-million units every year and this indicate the extent of housing finance market in the country.

In a message to the banks, he stated gone are the days when deposit mobilization, lending to a selected class of borrowers and investment in government papers was the only activity of the bankers. He urged the bankers to reduce their intermediary cost and explore investment opportunities in small and medium enterprises, housing finance, agriculture and rural loaning, consumer financing and micro loaning.

Shaukat Aziz said that housing and construction was a highly labour intensive activity and had a multiplier effect on industrial activities in the country. Revival of housing and finance, he said, would generate momentum in 40 allied industries that include cement, iron and steel, aluminium, PVD, paints, sanitary, carpets, stone crushing.

Therefore, he said, the acceleration in construction and housing remains a win-win situation for all. He said the general conditions in the country were well conducive to achieve a rapid growth and went on to recount a build up of strong foreign exchange reserve, a stable exchange rate and a steady economic growth.

Housing finance, he said, remained a neglected area and disclosed that in Pakistan it was hardly one per cent of the GDP as against 2.2 per cent in Bangladesh, 3 per cent in Sri Lanka, four to five per cent in Mexico, Brazil and Tunisia. In Thailand housing finance is 16 per cent of GDP and it is 21 per cent in Malaysia. In developed countries the average housing finance is 25 per cent of GDP but in USA it is 53 per cent and 36 per cent in EU.

“It is not lack of demand.” Shaukat Aziz explained dismally low housing finance in Pakistan and attributed it to the absence of a properly organized approach. High interest rates and somewhat lack of competition in financial sector, he said, are few factors.

“All this reflect a lack of understanding of home mortgage business in all stakeholders in our financial sector,” he pointed out and hoped that participants of the conference will come out with effective and practical ways of accelerating the pace of housing finance in the country.

He said the government had adopted a national housing policy, addressed all the core issues involved in construction and had provided tax incentive to home owners in the form of tax deductibility of mark-up up to Rs100,000 a year on home loans.

Shaukat Aziz spoke at length on mortgage financing, funding of housing finance, and a host all other related issues.