KARACHI: Lending rates for housing loans remained high during the quarter ending March 31, 2015, but the share of Islamic banks increased to 30pc.

According to State Bank’s Quarterly Housing Finance Review, overall weighted average markup rate stood at 13.1 per cent at the end of the quarter.

The highest weighted average profit rate of 14pc was reported by the House Building Finance Corporation (HBFC) and by the foreign banks. Islamic banks maintained profit of 13.4pc while private sector banks earned 10.8pc profit.

The high average markup rate could be the reason for small size of lending for the housing sector.

The report said that fresh disbursement of Rs3.3bn was made to 933 borrowers during the quarter ending March 31.

Over the year, disbursements worth Rs15.4bn were made by banks and Development Finance Institutions (DFIs).

Islamic banks new disbursements stood at Rs1.82bn. Private banks disbursements stood at Rs590 million while public sector banks extended Rs113m. HBFC’s fresh disbursements for the quarter stood at Rs748m.

The average loan size for disbursements during the quarter stood at Rs3.8m. Average loan size for HBFC was Rs2.5m. Private banks reported an average financing size of Rs5.8m which means only big borrowers were entertained.

Islamic banks reported an average financing of Rs5.1m. Public sector banks average loan size stood at Rs3m.

Banks have been facing acute shortage of long-term deposits which practically prevents them to extend long-term loans for housing projects.

Average maturity period of outstanding loans as on March 31 was 12.8 years. HBFC’s average maturity period is 12.8 years while that of public sector banks is 10 years. Among commercial banks, private banks extended housing finance loans for an average tenure of 13.6 years, followed by foreign banks for 12.5 years and Islamic banks for 11.2 years.

The share of private banks decreased by 2pc to 34pc while share of foreign banks, public sector banks and HBFCL remained unchanged.

Compared to previous quarter, market share of conventional banking (excluding HBFC) decreased by 1.52pc. The share of Islamic banking industry, however, increased by 2pc over the previous quarter.

“Islamic banks have surpassed HBFC with respect to gross outstanding. This is in line with consumers’ preference for Islamic banking over conventional banking,” said the SBP report.

The share of conventional banking, excluding HBFC, Islamic banking industry and HBFC in the gross outstanding was 40.48pc, 35.56pc and 23.96pc, respectively, as on March 31.

The report further said that the biggest share of housing finance continued to be attracted towards outright purchase. The gross outstanding for ‘outright purchase’ stood at Rs25.83bn as on March 31, with a share of 63.97pc in total outstanding amount of Rs40.37bn.

This is followed by the ‘construction’ category where gross outstanding reported at the quarter-end stood at Rs10bn and that of ‘renovation’ stood at Rs4.54bn.

Active portfolio shows that Islamic banks took a lead in financing for outright purchase at 47.5pc followed by private banks that have a share of 36.87pc in outright purchase financing.

The HBFC has taken a lead in financing construction category (38.64pc) and renovation category (51.64pc).

Published in Dawn, July 7th, 2015

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