Shariah-compliant housing finance up 28pc in Oct-Dec 2014

KARACHI: Islamic banks share in housing finance rose 28 percent during October-December of 2014 as consumers preferred shariah-compliant instruments, said the central banks’ housing finance review, issued recently.
The share of conventional commercial banks witnessed a decline of 36 percent over the previous quarter of 2014 due to banks’ reluctance to enhance their mortgage portfolio on account of weak foreclosure laws, it added.
Moreover, banks do not prefer lending outside a few big cities.
“Out of total fresh disbursements of Rs3.43 billion made to 937 borrowers during the quarter ending December 31, 2014, Islamic banks extended Rs1.90 billion followed by private banks with Rs734 million and public sector banks with Rs28 million,” the report said.
House Building Finance Company Limited (HBFCL) provided Rs772 million loans to the borrower during the period under review.
Though Islamic banks showed decent growth in loan disbursements, its share in non-performing finances (NPFs) witnessed an increase of 15.38 percent to Rs. 1.5 billion during October-December last year.
The report stated that Islamic banking has huge potential in housing finance market which is still untapped.
Housing finance has started picking up after 2008 but its growth was hampered by poor institutional framework, high transaction costs, unorganised real estate sector, inadequate property development framework and long term funding arrangements.
The state bank in its report forecasts that its soft policy stance will further help demand for housing finance in the country. Moreover, it will also be instrumental to increase economic growth through positive changes in 40 allied industries to housing sector.