KARACHI: The Pakistan Mortgage Refinance Company (PMRC) has received $58 million from the World Bank for low-cost housing while another $70m is in the pipeline.

The PMRC, which was established in June 2018 to promote housing sector, has already disbursed Rs1.2 billion to banks for that purpose.

“We received $58m on Friday for general housing while another $70m is in pipeline and the money will be used for the promotion of low-cost housing in the country,” PMRC CEO Mudassir H. Khan told Dawn.

The company makes advances to banks at low rates while the banks are allowed to lend this money solely for housing at their own fixed interest. PMRC builds its credit portfolio through loans from World Bank at cheaper rate.

Bank Alfalah and Askari Bank have already received money from PMRC while another two — including an Islamic bank — are engaged with the lender. Banks usually avoid long-term lending for housing sector mainly due to a lack of such long-term deposits and ineffective foreclosure laws.

“We are also negotiating with House Building Finance Corporation for low-cost housing projects and modalities are being finalised,” Khan said, adding that $58m is expected to be used within six months by banks.

Due to an acute shortage of houses (about 10m units), there is vast potential for banks and other investors to benefit from the opportunity, especially with the sector being a key priority area of the government’s socio-economic agenda.

“Being a member of Prime Minister’s Task Force on Housing, I can say that within 3-4 months a final draft would be ready for implementation,” Association of Builders and Developers (Abad) Chairman Mohammad Hassan Bakhshi told Dawn.

Since the formation of the task force, at least 10 meetings were held, chaired by Prime Minister Imran Khan. According to Bakhshi, the plan could offer small plots, houses and apartments at much cheaper rates.

Khan said his organisation’s efforts would support the government’s plan for low-cost housing but the two have no direct link. PMRC’s rate will be two percentage points less than that for three-year Pakistan Investment Bonds for low-cost housing and 50 basis points for general housing.

The State Bank of Pakistan also announced to introduce a subsidised financing facility for low-cost housing under which, banks will be lent up to Rs1m or 50pc of loan amount at an interest of 1pc while the end borrower’s will be charged 5pc.

According to SBP’s recent study, the financing for housing was just 0.5pc of GDP with lack of financing being one of the key constraints hampering supply of housing units.

Published in Dawn, January 27th, 2019