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Pakistan has a huge house financing market worth Rs200 billion

Due to limited resources HBFC disburses Rs4 billion for housing finance
Interview with Mr. Pervez Said– CEO & MD, House Building Finance Company (HBFC)

Pakistan is a huge market for house financing estimated at Rs200 billion to meet the ever-increasing demand for housing finance, however, HBFC disburses around Rs4 billion a year for housing finance because of limited financial backup, said Mr. Pervez Said, Chief Executive Officer and Managing Director, House Building Finance Company Limited in an interview.

Mr. Pervez Said prior to joining HBFC was on the Board of Al-Baraka Bank Pakistan Ltd. Mr. Said brings over 34 years of well-diversified work experience of banking and non-banking sectors to HBFCL. In the banking sector he has worked in both Islamic as well as conventional banking and has extensive exposure and experience of all aspects of banking at different levels including the Chief Executive Officer (CEO) position. He has served as a member and secretary of the State Bank of Pakistan’s Shariah Board. He has also worked for Meezan Investment Bank, Citibank, Mashreqbank in the UAE, State Bank of Pakistan and Burj Bank where he was also the CEO.

In non-banking sector he has worked for some of the world’s leading multinationals including Exxon Chemicals Pakistan Limited, Unilever Pakistan Ltd, Reckitt & Coleman Pakistan Ltd, W. Woodward Pakistan Ltd and Johnsons & Johnsons Pakistan Ltd where he rose to the level of the Managing Director.

Mr. Said is considered as an expert in Islamic banking and marketing. He is MBA from Ohio University USA with major in Finance and Marketing.

PAGE: WHAT ARE YOUR BUSINESS PLANS TO EXPAND YOUR SERVICES FOR HOUSING FINANCE?

PERVEZ SAID: We have forwarded a business plan to the government, which was duly approved by the Board of Directors. Under this new suggested plan we would be able to distribute Rs90 billion in the market as against the meager amount of Rs55 billion in last 64 years. On an average the distribution of home loans is about Rs4 billion, which usually crowd out a huge number of applications for home loans.

PAGE: WOULD YOU LIKE TO SHARE HOW HBFC IS SUPPORTING HOME FINANCING IN PAKISTAN?

PERVEZ SAID: The House Building Finance Company (HBFC) was earlier operating with a network of 50 branches mostly on manual system this distribution network is now being switched over to a flexible system of distribution to cater to loan requirements for housing finance at a reasonable cost.

In the first step we introduced a centralized processing system of loans for house building across the country. Now all loans applications and distribution is processed at the Head Office in Karachi. We are now in a process of digitalization of the system, which means that information will move from one end to the other instead of files, which is a time consuming process potentially prone to human error.

We have already designed a state-of-the art technology to digitalize the whole system, which will be introduced within next six months. This will help creating a scalable distribution system.

PAGE: WOULD YOU PLEASE SHARE THE AVERAGE INTEREST RATE BEING CHARGED ON HOME LOANS, CAR FINANCING, CONSUMER FINANCE AND PERSONAL LOANS AND DOES IT REFLECT THE LOWEST POLICY RATE OF 5.75 PERCENT OF THE STATE BANK OF PAKISTAN?

PERVEZ SAID: As I earlier mentioned about mark up rate we charge Kibor plus 3.5 percent cumulates around 9.6 percent on home loans being disbursed by HBFC which is quite affordable and reasonable as well, however it was around 14 percent during last year due to higher Kibor rate which had dipped significantly in the current financial year. Usually, the mark up rate is revised after every six months as the rate is linked with the fluctuation of Kibor.

PAGE: WHAT ARE THE CHALLENGES FACED BY HBFC?

PERVEZ SAID: We were confronted with two major challenges, which include high human resource cost with HBFC, which we have sorted out by offering a golden hand scheme, which was availed by around 200 staff members out of a total strength of 700 workforce within HBFC. After the retrenchment of 200 persons now the HR cost is well manageable.

The other challenge was lack of centralized system, which is also being upgraded with the induction of digitalized system which will be time saving and eliminating the paper work in the organization.

PAGE: WOULD YOU LIKE TO SHARE THE SIZE OF BAD LOANS OR NON PERFORMING LOANS IN YOUR ORGANIZATION?

PERVEZ SAID: When I took over the size of nonperforming loans was 53 percent, however, it was reduced to 33 percent with the concentrated efforts for the recovery of bad loans.

HBFC came into being in 1952 since then we never indulged in write offs, however, with the amendment in prudential regulations of the central bank we were able to reduce our bad loans, however, in certain cases such as earth quakes, floods or other natural calamity the loans were written off on directives of the government to facilitate the people of the affected areas, however, that written off amount was compensated by the government from its own resources.

There was a time when cities were built alongside the water or in the neighbor of rivers but now the technology advance has changed the demographic pattern and economic, industrial and financial development take place wherever energy is available. You can refer the fast track development of Dubai Saudi Arabia and other countries which are energy rich countries. The upcoming energy projects alongside the China Pakistan Economic Corridor will bring the demographic change with the establishment of industries, and other commercial centers when power projects will go into operation.

PAGE: YOUR COMMENTS ON URBANIZATION PROCESS IN PAKISTAN.

PERVEZ SAID: Pakistan is one of the countries where the rate of urbanization is the highest in the world, the rapid development of infrastructure, road links, ring roads, under passes and bridges in major cities like Karachi, Lahore, Islamabad and other have changed the dynamics of urbanization while the fast upcoming project of CPEC will entirely change the urbanization dimensions in Pakistan.

You may recall that new cities were used to be developed near water or in the neighborhood of rivers. Now the situation has become different now the new cities are developed when energy is available as well as road linkages with rest of the country. The development of Dubai is the best example of city development due to plenty of energy available, which resolve the water issue as well.

With the development of CPEC which is not only an economic corridor but also an energy corridor which would be potentially capable to bring the change on a massive pattern in Pakistan. It is the energy, which triggers all economic dynamics. CPEC is bound to bring a demographic change on a massive pattern in Pakistan.

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