Pakistan launches mortgage refinance company amid housing shortage

Jameel Ahmed, Deputy Governor of State Bank of Pakistan speaking at the Shareholders’ agreement signing Ceremony of PMRC. (AN photo)
Updated 16 April 2018
0

Pakistan launches mortgage refinance company amid housing shortage

  • PMRC is required to fulfill Rs 6 billion ($60 million) paid up capital requirement
  • Pakistan faces shortfall of 10 million housing units, demand rises 0.4-0.7 million per year

KARACHI: To address the country’s chronic house financing issues, refinancing company Pakistan Mortgage Refinance Company was launched on Saturday with the aim of mitigating credit risk for banks by providing fixed-rate funds.
The government of Pakistan holds 49 percent of PMRC, while private institutions, including banks, hold a majority 51 percent stake.
Pakistan currently faces a 10 million housing shortage mainly due to low or no financing available in the sector which stands at only 0.5 percent of the Gross Domestic Product. Acute shortage persists in the price range of Rs 1 million to Rs 3 million ($8,600 to $25,900) in urban centers where incomes range between Rs 30,000 to Rs 100,000. “The country faces shortage of around 10 million houses and the demand is growing at the rate of 400,000 to 700,000 houses per year mainly in the middle and low income segments,” N. Kokularupan, Managing Director and CEO of PMRC said at a ceremony where PMRC shareholders signed the agreement.
As a Development Financial Institution (DFI), PMRC will be required to fulfil a minimum paid-up capital of Rs 6 billion ($51.8 million). Currently, committed capital of PMRC from the government, 8 banks and another DFI is Rs 3.45 billion, resulting in a shortfall of Rs 2.55 billion.
The company has requested the central bank, State Bank of Pakistan (SBP), to allow PMRC to start operations with Rs4 billion as equity, with a condition to fulfil the shortfall of Rs 2 billion in 5 years.
The Government of Pakistan has also taken a $134 million credit line from the World Bank with the objective of increasing access to housing finance in line with Financial Inclusion Strategy approved by the Federal Government by deepening mortgage markets in Pakistan.
The creation of PMRC marks an important milestone in Pakistan’s aim to improve access to housing finance, particularly to the middle and low-income group of borrowers who need access to long-term housing finance with stable and fixed rates that are not subject to interest rate fluctuations.
Kokularupan said the Pakistani government directly holds 32 percent shares while public sector banks and a DFI hold 17 percent, and private sector banks hold 51 percent stakes in the PMRC.
Easy access to long-term housing loans at reasonable costs mitigates credit risks for banks as they provide fixed-rate funds, as well as medium to long-term funding for banks, and help control nonperforming loans — all of the key benefits of PMRC, Kokularupan added.
Rehmat Ali Hasnie, chairman of the board of directors of PMRC, said there was a great potential in the housing industry that needs to be tapped.
“The Gross Outstanding Housing Finance Portfolio as on December 2013 stood at Rs 51 billion and it increased to approximately Rs 80 billion in 2017, hence, depicting an increasing trend for innovative, viable and market based financial products for the development of mortgage market in Pakistan,” Hasnie said.
The company would be supervised by the SBP. “The central bank in its vision 2020 has clearly prioritized housing, agriculture and SMEs for development,” said Jameel Ahmed, deputy governor of SBP, calling the country’s irregular settlements a “breeding ground of crimes”.
The World Bank has provided $137 million assistance for financial inclusion, and the amount will be part of PMRC, said Namous Zaheer, a representative of World Bank. The World Bank is also weighing the possibility of enabling women to own their own houses, as only 2 percent of women in Pakistan are home-owners, she added.
Saeed Ahmed, president of National Bank of Pakistan, said only low-cost housing schemes can reduce the shortage of houses.
The National Bank has launched a low-cost housing scheme in Khyber Pakhtunkhwa (KP) with a portfolio of Rs 400 billion, he said. “We are financing the housing project on the request of the KP government and if other governments will come up with any proposal, we will also finance them,” he added.
PMRC’s major shareholders are the government of Pakistan- Ministry of Finance, National Bank of Pakistan, Askari Commercial Bank, Habib Bank, United Bank, and Allied Bank.


French ‘rogue trader’ Kerviel loses bid for retrial

Updated 20 September 2018
0

French ‘rogue trader’ Kerviel loses bid for retrial

  • The former French investment banker’s trades cost his employer Société Générale €4.9 billion
  • Kerviel has fought a 10-year legal battle against his former employer, alleging that his superiors were aware of his trading

PARIS: Jerome Kerviel, the former French investment banker whose trades cost his employer Société Générale €4.9 billion, lost a legal bid Thursday to force a retrial following his 2010 conviction, a lawyer acting for the bank said.
A French legal commission that deals with requests for retrials “has decided that there was nothing new, that Mr.Kerviel’s request was without basis,” a lawyer acting for Société Générale, Jean Veil, told reporters.
Kerviel was sentenced to a five-year prison term in 2010, with two years suspended, for breach of trust, forgery and entering false data over his huge trading losses which he attempted to hide from the bank.
The losses amount to $5.8 billion at current exchange rates.
The former trader, now aged 41, has fought a 10-year legal battle against his former employer, alleging that his superiors were aware of his trading and then attempted to manipulate the judicial investigation afterwards.
Kerviel, who was released from jail after four months behind bars, has lost two previous appeals against his convictions in 2012 and 2014.