Pakistan Can Generate Loans Worth $3.8 Billion from Low-Income Housing Market

An additional loan volume of $3.8 billion can be created in the mortgage finance market by existing and new housing finance players, which in turn could serve approximately 0.5 million customers, says the World Bank Group.

The International Finance Corporation (IFC), a member of the World Bank Group, in its latest report, titled “Pakistan Housing Finance, Is there a business case for financial institutions?”,  stated that there is a high demand for housing units from Pakistan’s low-income segment.

However, the current supply is negligible. Only 1 percent of the housing supply caters to 68 percent of the population earning a monthly income of up to $188.

The report stated that most of the housing supply targets the high and affluent class in line with commercial viability and affordability. Approximately 56 percent of housing units cater to 12 percent of the population earning a monthly income of more than $625. Housing Finance has the potential to expand in Pakistan, the report added.

The report further highlights that despite a low national mortgage-to-GDP ratio, Financial Institutions are only limited to Tier 1 cities for their mortgage finance products. It said that with the appropriate products, systems, and funding, mortgage finance can be expanded to 26 cities, with the potential to reach approximately 500,000 additional clients across different income segments.

The report noted challenges in the housing sector in Pakistan including a lack of affordable housing supply, issues with land titling, registration, administration, and record-keeping, limited medium- to long-term funding, nascent capital markets for raising long-term funding, and limited capacity of Financial Institutions to offer and manage housing finance.