In a recent press release House Building Finance Corporation Limited (HBFCL) has announced that its financial position improved significantly during tenure of current government. HBFCL hopes that it will result in greater organizational stability,

HBFCL reports that it disbursed loans of Rs4,556 million in the housing sector during current government’s tenure and recovered Rs6,300 million. According to report, average loan size was Rs600,000.

If we look at the figures, we have some interesting observations. The disbursement of Rs4.556 billion in around 23 months – around Rs198 million disbursement per month – is insufficient compared to size of house finance market major share of which is served by private commercial banks. The amount becomes even more insignificant if we look at the backlog of hundred of thousands of housing units in the country.

Also, the average loan size of Rs0.6 million is very small and does not seem to fulfill a genuine customer need when current real estate and construction prices are pictured in mind. This however may be because of HBFC serving lower-middle and middle income stratus of society, who find it difficult to fulfill stringent financing criteria of private commercial banks.

Association of Builders and Developers (ABAD) has been calling on the government to enhance financing for building new housing units. They suggest that enhanced house building is human intensive industry and thus provides employment to large segment of populace.

ABAD representatives add that house building sector is tightly knitted with other industrial sectors. According to them, increased activity in house building have waterfall effect on industries such as cement, steel, sanitary ware.

On the recoveries side while amount of Rs6.3 billion apparently seems good in isolation, we gain a meaningful perspective only after learning about volume of non-performing loans (NPLs) of the Corporation.