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MAKING MORTGAGE FINANCE WORK Muhammad Ejaz
CEO Arif Habib Dolmen REIT Management Limited
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PAKISTAN
Capital: Islamabad
Area: 340,509 square miles
Largest City: Karachi
Languages: Urdu & English
Federal parliamentary republic
North: China
South: Arabian Sea
East: India
West: Afghanistan
& Iran
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4 bn
Asia Europe
1 bn
World Population in 2015
1bn Americas
1bn Africa
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5 bn
Asia Europe
1 bn
World Population in 2100
1bn Americas
4 bn Africa
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GDP USD 311 Billion
GDP per Capita USD 1,629
GDP Growth 5.28%
25th largest In terms of PPP
42nd largest In nominal terms
Economy
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Vibrant and Comfortable Financial Sector
BANKS
30 Commercial 10 Microfinance 8 DFIs
ROE ˃ 15% CAR ˃ 16%
46.6% ADR - banking industry advances of PKR 6,013 billion
85% CASA paying an average of 3.8% to depositors
CAPITAL MARKETS Average return over 15 years ˃ 30% (CAGR)
• Templeton • Tundra Fonder • Acumen Fund • CDC Group • The Abraaj Group • Abu Dhabi Group companies • Rocket Internet Capital Partners
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Population Dynamics
Total Population: 199.1 Million 51% Males : 49% Females 40% : 60% Urban : Rural split
Adults (15-65yrs) At Present: 115 million In 2050: >200m
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Dolmen City Mall and Harbour Front Office Building, Karachi
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$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11
Households by Per Capita Consumption
2001-02
57%
33.3%
8.6% 1.2%
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$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11
Households by Per Capita Consumption
2001-02 2013-14
6.8%
45.2%
41.5% 6.6%
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$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11
2001-02 2013-14 2030
3%
17%
65% 15%
Households by Per Capita Consumption by 2030
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Market Boom Pakistan witnessed a real estate boom and Property prices skyrocketed making mortgage finance a real need.
2008-2017
Role of Banks / DFIs in Housing Sector From 1952 to 2003; HBFCL (House Building Finance Co.) was the only specialized housing bank in the country. Commercial banks entered the mortgage business in 2003. Nation’s first Islamic Housing Finance facility was launched by Meezan Bank in2003. 2003
Recession In 2008, the real estate market witnessed a slump. Banks engaged in housing finance either stopped or slow down the mortgage business.
2008
Karachi
Housing Finance in Pakistan
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6.013
69,25
2016
Negligible Housing Finance (Amounts in PKR Billion)
Housing Finance
Overall Bank Advances
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75,74%
69,38%
16,50%
9,00%
0,50%
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00%
US
UK
China
India
Pakistan
Mortgage-Debt-to-GDP Ratio
Bank Buildings
Capital / Funding Starvation
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*Clearing the backlog in 10 years would need annual investment in excess of USD 20 billion
Millions of Units 2016 (E) Million units
Present Inventory of Houses 24.25
Housing Backlog* 10
Incremental Annual Requirement
0.70
Annual Production 0.30
PIB Colony, Karachi
Capital Starvation Leading to Acute Housing Shortage
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0,5
0,5
1,3
2,7
3,0
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5
UK
USA
Turkey
India
Pakistan
People per Room
Karsaz Road, Karachi
Housing Shortage Leading to Congested Living
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Pakistan – A Convincing Story for Mortgage Finance
• High volume backlog of housing
• Growing Middle Class
• Improving income levels
• Favourable Demographics
• Organised sector interest turning towards housing
• Evolving Regulatory Framework
Prudential Regulations (+ive) Mortgage Refinance Company (+ive) REIT Regulations (+ive) Land Documentation Computerisation (+ive) Foreclosure Laws (-ive)
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Impediments to Mortgage Finance in Pakistan
• Lack of government and institutional resources
• Absence of specialized institutions
• Existing FIs lack capital, skillset, and incentives
• Regulatory regime though favourable needs further improvement
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Quaid Mausoleum, Karachi
• Strong local partner and infrastructure
• Stringent cost controls
• Strategic alliances
• Modern product suite
Strategy to Enter Pakistan
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Thank You