KARACHI, July 13: Inflated property prices, higher cost of labour and construction materials and lack of interest by the commercial banks have suppressed the potential growth of the housing sector in Pakistan.

The State Bank on Friday issued Quarterly Housing Finance Review Jan-March 2012. The report showed a depressive housing growth despite having large potential to grow.

The quarter ending March 31, 2012 depicted a decrease of 10.5 per cent (Rs6.88 billion) in overall outstanding portfolio of housing finance industry as compared to same quarter last year.

The NPLs of the housing finance portfolio display a rising trend and banks continue to show signs of cautious lending amidst decreased affordability of the borrowers due to inflated prices of property and houses, labour and construction materials, said the report.

Another reason hindering the growth of housing finance is reluctance of banks for lending beyond certain big cities.

“The lack of efficient institutional framework and secondary mortgage market and high interest rates are still the major constraints towards the growth of housing and housing finance sector which is one of the potential key drivers of the economy,” said the report.

The total outstanding finance as on March 31, 2012 of all banks and DFIs stood at Rs58 billion as compared to Rs59 billion as on December 31, 2011, showing a decrease of 1.34 per cent). As of March 31, 2011, outstanding of all commercial banks and DFIs collectively decreased by 11.93 per cent.

Of the total outstanding as on March 31, 2012, commercial banks accounted for Rs45.2 billion; a 11.8 per cent decline since quarter ending March 31, 2011, the private banks reported Rs28.4 billion followed by Islamic banks at Rs8.7 billion, public sector banks at Rs7.9 billion and foreign banks with Rs0.3 billion.

The outstanding loans of HBFC were Rs13 billion; down by 5.23 per cent over the last year. Other DFIs have a meagre share of Rs0.2 billion in outstanding loans.

The total outstanding housing finance as on March 31, 2012 of Islamic banking industry stood at Rs12.4 billion.

Fresh disbursements to the tune of Rs1.61 billion were made to 766 borrowers during the quarter March 2012. Private banks extended new disbursements with Rs888 million followed by Islamic banks with Rs407 million, public sector banks with Rs15 million and foreign banks with Rs6 million.

The HBFC’s fresh disbursements for the quarter were reported to be Rs296 million. Among commercial banks, the number of new borrowers totalled 400, with private banks serving 290 borrowers and Islamic banks 98 customers. HBFCL extended loans to 366 new borrowers during the reporting quarter.

Fresh disbursement for Islamic banking industry was Rs717 million during the quarter ending March 2012.