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Mortgage Finance

Opportunities and Challenges
By
Taimur Afzal, Chairman
ASSOCIATION OF MORTGAGE BANKERS (AMB)
March 25th 2013 1
Obama’s State of Union Address
2013
March 25th 2013 2
Pakistan Population
 Population (2011) 187 Million
 World's sixth most-populous country
 Population Growth Rate 1.6 %
 Urban population 35%
 Second most urbanized nation in South Asia
 Population below age of 25 Years 100 Million
 Major Cities
◦ Karachi 21M Lahore 11 M RWP 3.5 M Faisalabad 3M
◦ Hyderabad 3M Multan 2.6 M GRW 2.5 M Peshawar 3.6
M
◦ Quetta 2M
March 25th 2013 3
Pakistan Economy
• GDP Rs. 20,600 Billion
• GDP Growth Rate 3.67%
• Employment by Sector
• Industry 13.7%
• Construction 7%
• Agriculture 45%
• Un-Employment rate 6%
 Inflation Rate 11 % (2012)
March 25th 2013 4
Pakistan Banking Assets

(Rs. in Billion)
Segment Advances NPLs
Infection
Ratio
Corporate Sector 2,760 419 15.2
SMEs Sector 276 95 34.6
Agriculture Sector 203 29 14.5
Consumer sector 250 43 17.5
Commodity financing 512 6 1.1
Staff Loans 84 2 1.9
Others 108 12 10.8
Total 4,196 607 14.5
Mortgage Financing
Portfolio 53 B
NPLs 17 B
Inf. Ratio 31.4%
Corporate Sector,
66%
SMEs Sector, 7%
Agriculture
Sector, 5%
Consumer sector
6%
Commodity
financing, 12%
Staff Loans, 2%
Others, 3%
March 25th 2013
5
Mortgage as %age of GDP

GDP Pakistan = Rs. 20,600 Billion
Mortgage portfolio = Rs. 53 Billion
Staff House Finance = Rs. 77 Billion
Mortgage = 0.7 % of GDP
International Comparables
March 25th 2013 6
Potential of Housing Sector
Housing Shortfall
 World Bank Estimation 8 million housing units (2009)
 Annual incremental demand 600,000 units.

 Annual housing needs 1.1 million Units
(600,000 incremental demand and 500,000 units from the backlog)

 Total Funding requirement Rs. 3.3 trillion per year
(average price of Rs. 3 million per unit)

 Funding Demand Rs.330 billion
(Assuming only 10% housing needs as effective demand)

 Mortgage Financing Requirement Rs. 231 billion per annum
(At 70% LTV)


March 25th 2013 7
Success Story
March 25th 2013 8
INDIA – Growth of Mortgage
 Mortgage to GDP ratio
2012 9%
2002 2%
 Mortgages comprise the largest
component in banks’ retail portfolio
 Mortgages have grown from 1.5% of
banks’ advances to 10% over the last
10 years
 Projections 2020
Outstanding mortgages will increase 8 fold
from Rs. 5 trillion currently to Rs. 40
trillion by 2020

Mortgage to GDP ratio projected
at 20% by 2020
March 25th 2013 9
Growth Drivers in India
 Growth driven by
◦ Economic growth
◦ Rising disposable income
◦ Affordable interest rates
◦ Increased urbanization
◦ Favorable demographics
◦ Housing as a priority sector

March 25th 2013 10
Growth Drivers in India
 National Housing Bank
◦ Housing regulatory framework
◦ Refinancing
◦ Focus on low to mid income segment
◦ NHB Residex
 Foreclosure laws
◦ SARFAESI
◦ Reduced NPA
 Securitization
◦ Mortgage registry

March 25th 2013 11
Growth Drivers in India
 Mortgage Guarantee/ Insurance
 Tax incentives
 Specialized Housing Finance Companies
 Focused provisioning

March 25th 2013 12
Solution
March 25th 2013 13
What can be done ?
 Macro Factors
◦ Economic growth
◦ infrastructure
◦ Affordable interest rates
◦ Real estate prices
 Funding sources
◦ Channelization of long term funds
◦ Securitization
◦ Refinancing
◦ Mortgage insurance/ guarantee



March 25th 2013 14
What can be done ?
 Legal framework
◦ Foreclosure
◦ Stamp /registration fees
◦ Title documents

 Regulatory issues
◦ Mortgage specific regulations
◦ Provisioning issues
◦ Credit rationing

March 25th 2013 15
What can be done ?
 Product development
◦ Target market diversity
◦ Tier 2 cities
◦ Developer-buyer financing model
◦ Focused product
 Public sector employees
 Private sector employees
 Rural customers
March 25th 2013 16
Year
GDP
(Rs. In Billion)
Mortgage
Portfolio
(Rs. In Billion)
Mortgage as
%age of GDP
2012 20,600 53 0.26%
2015 23,000 460 2.00%
2020 28,000 1,120 4.00%
2025 33,000 1,980 6.00%
2030 38,000 3,800 10.00%
Vision 2030
March 25th 2013 17
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Thank you

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