Hasty growth in housing finance
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Loading... - Gopinath Vadnik
- 24 Mar 2022
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Currently, though, banks are not wholesomely engaged in such an exercise. But the government and the State Bank of Pakistan (SBP) are trying to promote just that. Policies introduced for accelerating housing loans offer an added advantage to the government — they make room for politically-motivated tax amnesty in the name of the documentation of the economy. The ongoing Naya Pakistan Housing Programme (NPHP) is no exception.
Regardless of the fact that this is opening yet another avenue under this programme for the whitening of tax-evaded money, housing loans being offered under NPHP are quite promising. Already, they have reactivated the real estate and building construction sector and continue to enliven demand for outputs of dozens of allied industries and services sub-sectors. Their impact on the overall economy (rebased to 2015-16) is already being felt and is sure to become more and more pronounced with the passage of time. That is if future governments let the programme continue in its current form and spirit.
Within seven months of this fiscal year (ie between July 2021 and Jan 2022), banks disbursed fresh consumers loans of Rs47.6 billion for the construction of buildings. In addition to this, they also disbursed Rs11.8bn loans to their employees for the same purpose.
Thus, overall lending for construction of buildings in the first seven months of this fiscal year totalled Rs59.4bn, the latest SBP stats reveal. During the same period of the last fiscal year, total lending for housing buildings was too small — Rs7.9bn for general consumers and Rs22bn for bank employees or a total of Rs29.9bn!
The demand for housing finance remained strong right from the beginning of this fiscal year partly because builders were using tax-evaded money for launching new housing projects following extension in the tax amnesty scheme. Partly, higher economic growth in 2021-21 compared to that of 2019-20 also motivated people to take advantage of the Naya Pakistan Housing Programme made easier this year — and apply for housing loans.
So, the volumes of housing finance offered so far could have been larger had banks been able to process loans applications a bit more speedily. The PTI government, challenged on all fronts and struggling for its survival, is pushing banks to their limits through the central bank to accelerate the disbursement of housing loans. So, one can hope that the volumes of fresh housing loans would grow even faster in near future, more so because the “no-question asked” status of the investment coming into this sector has been extended — once again — to the end of FY22 in June. Read More...
