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Mortgage F inance Opportunities and Challenges

Mortgage F inance Opportunities and Challenges. By Taimur Afzal, Chairman ASSOCIATION OF MORTGAGE BANKERS (AMB). Obama’s State of Union Address 2013. Pakistan Population. Population (2011) 187 Million World's sixth most-populous country

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Mortgage F inance Opportunities and Challenges

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  1. Mortgage Finance Opportunities and Challenges By Taimur Afzal, Chairman ASSOCIATION OF MORTGAGE BANKERS (AMB) March 25th 2013

  2. Obama’s State of Union Address 2013 March 25th 2013

  3. 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 Years100 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

  4. 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

  5. Pakistan Banking Assets Mortgage Financing Portfolio 53 B NPLs 17 B Inf. Ratio 31.4% March 25th 2013

  6. 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

  7. 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

  8. Success Story March 25th 2013

  9. INDIA – Growth of Mortgage Mortgage to GDP ratio projected at 20% by 2020 • 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 March 25th 2013

  10. 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

  11. 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

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

  13. Solution March 25th 2013

  14. 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

  15. What can be done ? • Legal framework • Foreclosure • Stamp /registration fees • Title documents • Regulatory issues • Mortgage specific regulations • Provisioning issues • Credit rationing March 25th 2013

  16. 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

  17. Vision 2030 March 25th 2013

  18. Thank you March 25th 2013

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