KARACHI, April 12: The House Building Finance Corporation (HBFC) on Saturday singed legal documents for the issue of first tranche of Sukuk worth Rs1.5 billion. This is the first mortgaged-based Sukuk issue in the country.

The signing ceremony between the HBFC and the subscribers of the Sukuk issue was held at Finance and Trade Centre, auditorium. The Sukuk has been subscribed by a diverse investors comprising non-banking financial institutions (NBFIs), Islamic commercial banks, Islamic mutual funds and Takaful company.

Speaking on the occasion the HBFC managing director apprised investors that the funds raised through the Sukuk issue will be utilised for business expansion plan laid down by the International Finance Corporation (IFC).

He said the business plan envisages an aggressive but prudent lending by the HBFC over a period of next five years thereby increasing the annual disbursement from the current Rs3.5 billion to about Rs20 billion in 2012.

The subscribers hailed the HBFC’s first Shariah-compliant Sukuk issue and felt it is a landmark achievement in the development of housing finance sector in the country. As per set plan the HBFC is targeting to disburse Rs8 billion during 2008.

The HBFC’s Sukuk issue offers attractive return to its investors with a one per cent spread over the base rate of 6-month Kibor. Rentals will be payable on semi-annual basis and the Musharaka units will be re-purchased by the HBFC in equal instalments starting from the 18th month.

The HBFC has so far financed around 0.4 million houses for Rs45 billion. The government of Pakistan and State Bank of Pakistan jointly hold the share capital of the corporation. In July 2007, it has been incorporated as a public limited company.

The corporation has a large network of 60 branches with 34 representative offices spread across the country. Unlike other financial institutions engaged in housing finance, the bulk of HBFC loan disbursements are to low-income group and for construction of houses, as against outright purchase and renovation.