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Mortgage Finance Mortgage Finance Opportunities and Challenges Opportunities and Challenges
ByByTaimur Afzal, ChairmanTaimur Afzal, ChairmanASSOCIATION OF MORTGAGE BANKERS (AMB)ASSOCIATION OF MORTGAGE BANKERS (AMB)
March 25th 2013 1
Obama’s State of Union Obama’s State of Union Address 2013Address 2013
March 25th 2013 2
Pakistan PopulationPakistan 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 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 Pakistan Banking Assets 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 March 25th 2013 5
Mortgage as %age of GDPMortgage 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 Potential of Housing SectorSectorHousing 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 Success StoryStory
March 25th 2013 8
INDIA – Growth of INDIA – Growth of MortgageMortgage
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 IndiaGrowth Drivers in IndiaGrowth 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 IndiaGrowth 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 IndiaGrowth Drivers in India
Mortgage Guarantee/ Insurance
Tax incentives
Specialized Housing Finance Companies
Focused provisioning
March 25th 2013 12
SolutionSolution
March 25th 2013 13
What can be done ?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 ?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 ?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 2030Vision 2030
March 25th 2013 17
Thank youThank you
March 25th 2013 18