A Brief About

House Building Finance Corporation

House Building Finance Company Limited

Prepared by:Syed Sayef Hussain

Acting Managing Director

From 1952 to 2006

Since 2007

April 2014

HBFCL is very strict about security of loans. It boasts of unique and comprehensive knowledge of property documentation, revenue records and related matters. In HBFCL, people know their technical job very well.

That’s why we in HBFCL claim that, we are not just a company, rather, we are an invaluable national housing institution!

The strength of HBFCL

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Balance Sheets of 1952 and 2013

Particulars 1952 2013

Cash & Banks 0.734 307.465

Loans & Advances -- 9,739.411

Investments 4.150 10,472.535

Other Assets 0.063 1,041.869

Total Assets 4.947 21,561.280

Particulars 1952 2013

Capital & Equity 4.947 2,823.692

Borrowings -- 11,392.300

Other Liabilities -- 7,345.288

Total Liabilities 4.947 21,561.280

1952 2013

(Rupees in million)

Note: In Minimum Capital Requirement (MCR) of Rs.6.0 billion,HBFCL is deficient by about Rs.3.2 billion. HBFCL suggests that, byconverting the borrowings (credit lines received from SBP) tocapital to the required extent, this deficiency can be easilyremoved. SBP can, on its own, do this, or can use a vehicle like NBPfor this purpose. 3

Balance Sheets of 1952 and 2013

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Analytical comments

The previous slide shows that, HBFC started its journey in 1952 with about only about Rs.5 million of equity. Today it is carrying an equity of more than Rs.2,800 million, and it has done it on its own. These are all credit to the Federal Government. This is undoubtedly a great achievement. It counters the perception of its being inefficient and corrupt organization!

VISION

To be the prime housing finance institution of the country, providing affordable housing solutions to low and middle income groups of population by encouraging new constructions in small and medium housing (SMH) sector.

HBFCL’s Mission and Vision

MISSION

To be a socially responsible and commercially sustainable housing finance institution.

CORE VALUES

• Integrity

• Customer focus

• Commitment to excellence & innovation

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1. Pakistan Employees Cooperative Housing Society, Karachi at the inception of Pakistan

2. Rehabilitation of former East Pakistan’s displaced persons (1971)

3. Flood loan cases (1973)

4. Rehabilitation of displaced persons of Occupied Jammu & Kashmir (circa 1976)

5. Lahore Urban Development Programme (1991-1992)

6. Low cost housing of Surjani Town, Karachi (1979-1985)

7. “Shelter for Shelterless People” scheme of PM Junejo (1985-1988)

8. Widow, orphan, destitute govt servants’ loan remission by Premier Nawaz Sharif (1997-1999)

9. Sindh Gothabad Scheme, started through an Ordinance of Prov. Govt. of Sindh (2001)

10. And many more!

HBFC’s Contributions to the NationWith the creation of Pakistan, the world saw the largest human migration, and largestdisplacement of government employees. The founding fathers of Pakistan immediately realizedthe gravity of the situation and the need of habitat for these displaced persons, particularly thegovernment employees. Within half a decade, that is in 1952, they established House BuildingFinance Corporation (HBFC), one of its kind in this region. Since then HBFC has been whole-heartedly serving the nation at the behest of the Governments through various schemes andprogrammes, only some of which are given below. In fact, for serving the nation theGovernments always relied on HBFC!

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S/No Particulars No. of Accounts

1. Total no. of accounts opened 461,427

2. Total NPLs to date 40,269

3. Total fraud and forgery cases 1,675

4. Total delinquencies 41,944

5. Ratio of delinquencies (4 over 1) 9.09%

Disbursements & DelinquenciesSince inception to date

NOTE:Under HBFC Act 1952, HBFC was not allowed to write off any Principal amount, hence delinquency has piled up to the extent stated here, giving the NPL ratio in present portfolio as more than 60%, which is unrealistic.

Current portfolio position

Outstanding A/Cs 55,951

Non-performing A/Cs 41,944

NPL ratio on count 74.97%

NPL ratio on rupee 54.00%

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Disbursements & Delinquencies

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Analytical comments

This information in previous slide is a solid proof that, the general perception about HBFCL that, it is a corrupt and inefficient organization is not real fact. For example, in over six decades since inception, there have been only total 1,675 fraud cases out of total 461,427 looks to be quite negligible. We have taken various steps to eliminate even this negligible possibility of fraud and forgery.

There are however quite considerable number of non-performing cases, which although is 9% of total cases written by HBFC since inception, but is considerably high when it is seen in the context of presently outstanding portfolio, which is staggering 75% on count of accounts and 54% on outstanding balances. This is a matter of concern, but not out of control. Apart from other credible things, if SBP announces prudential regulations, specific for housing, the situation will change quite drastically, we believe!

History of Disbursements & Recoveries

* Up to March 2014

Since inception

Total disbursements 52.4 billion

Total recoveries 74.6 billion

Net inflow 22.2 billion

Presently outstanding 12.8 billion

Percentage of net inflow 42%

Year-wise detail of disbursements and recoveries:

YearNo. of Accounts

Sanctioned

Disbursed

Amount

Recovered

Amount

Up to 2002 416,464 30.79 38.1

2003 5,892 1.5 2.8

2004 7,597 2.5 2.5

2005 5,996 2.2 2.9

2006 5,716 2.3 3.8

2007 6,812 3.4 3.3

2008 6,130 3.9 3.2

2009 716 0.7 3.6

2010 992 0.6 3.4

2011 1,510 1.1 3.3

2012 1,588 1.3 3.2

2013 1,674 1.6 3.7

2014* 340 0.5 0.8

Total: 461,427 52.4 74.6

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History of Disbursements & Recoveries

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Analytical comments

In more than six decades since 1952, HBFC disbursed Rs.52.4 billion, and against this it collected Rs.74.6 billion, thus having a net cash inflow of Rs.22.2 billion, which is 42% of investment/ disbursements. It shows that, under given mandates, HBFC did the great job as a specialized financial institution during all these years.

History of Credit Lines• In distant past, HBFC used to issue debentures to raise funds for its business.• Since 1973 till 2002, HBFC was given Credit Lines by SBP on guarantee of

Federal Government for 10 years’ term on profit and loss sharing.• A brief about the credit lines is given below:

• With the approval of the Federal Government and concurrence of the State Bank, HBFCL wants to have debt-equity swap of part of the outstanding dues to meet minimum capital requirements.

Total amount received since 1973 till 2002 35,830.9 million

Total amount repaid to SBP 24,588.6 million

Total markup/profit paid to SBP 10,573.7 million

Principal outstanding as of to date 11,242.3 million

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Planned Future Disbursements

Year EndYearly Housing Finance

Cities of

attentionNumber of

accounts

Amount

(Rs. in Bn/Yr)

2015 5,980 2.200 50

2016 11,000 4.000 85

2017 17,250 6.000 125

2018 22,500 9.000 150

2019 35,000 12.000 150

2020 40,000 15.000 150

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• We are looking for “cash cow” for business growth.

• We intend to focus on housing project financing and town development.

• We intend to enter into real estate market for generating required funds.

• We would like to address tenure mismatch in housing finance, where lending are for a very long period, whereas fund available in the market are for very short period.

• To cope with this mismatch, SBP and IFC is already working for establishment of mortgage refinance company on the initiative of HBFCL. This needs to be expedited.

• Housing finance specific Prudential Regulations are the need of the day. Presently housing finance, which are backed by invaluable real estate, are being treated and regulated as highly unsecured consumer financing.

Way Forward

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Old HBFC

Up to 2006

New HBFC

Since 2006

Organizational Structure of HBFCL

R.O.

Z.O

B.O

B.O

Administrative

Coverage

Current Planned

HO 1 1

RO 3 3

ZO 10 10

BO 51 51

RPO - 29*

Rep.OH.O.

Z.O

KeyH.O. Head OfficeR.O. Regional OfficeZ.O. Zonal OfficeB.O. Branch OfficeRep. O Representative Office

Z.O

Z.O

Rep.O

B.O

B.O

Rep.O

Rep.ORep.O

*To cater remote areas of the country, SBP’s permission has been sought to open ROs 16

Options regarding HBFCL

• The Pakistan Government may like to make HBFCL fully effective • The following options have been evaluated (CMHC, Canada):

– Option 1: Restructure and activate HBFCL to the fullest– Option 2: Close HBFCL and start up a new mortgage lender– Option 3: Close HBFCL and rely on existing mortgage lenders to serve

Pakistan

• Recommendation: Restructure and Activate– Offer some of government’s and SBP’s holdings to some strategic investors including National Bank of

Pakistan– Offer some portion to capital to the market, to enhance the worth of Government’s holdings– Accordingly serve the nation and the vote bank

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