Apart from other limiting legal and operational obstacles, non-availability of long-term liquidity does not allow requisite growth in housing finance in Pakistan, said Saeed Ahmed, Deputy Governor while chairing the first meeting of the Steering Committee of Mortgage Refinance Company (MRC) on Monday (October 13), at the State Bank.
The meeting was also attended by other members of the committee including executives of MRC's equity holder banks/DFIs, representative from the Ministry of Finance, Ministry of Housing & Works, and an industry specialist from IFC. The committee would steer the process of incorporation of MRC expeditiously in a planned manner. Further, the steering committee will also be responsible for discussing pre- and post- incorporation formalities for the MRC.
In his opening remarks, Saeed Ahmad highlighted the fact that Pakistan is far behind in terms of mortgage finance to GDP ratio even within the region. He emphasised on the need for development of housing sector because of its forward and backward linkages with more than 40 allied industries. He further mentioned that realising its significance, the federal government and the State Bank of Pakistan are taking various steps for the promotion and development of housing finance.
While other key issues including foreclosure laws, land record system, stamp duties, etc, are being handled separately by the concerned quarters, formation of MRC under public-private-partnership model, would help in provision of long-term funding to primary mortgage market and development of secondary market in Pakistan by adopting appropriate refinancing models. Further, the chair also briefed that significant progress has been made during this year as feasibility report of MRC has been revalidated by independent international consultants and firm equity commitments have been secured from commercial banks/DFIs and the Government of Pakistan. Saeed Ahmad clarified that MRC will work on with-recourse model which will ensure that its financial health is not affected in case of default by mortgage borrowers as banks would be required to replace bad mortgages with the good ones. MRC will also help develop capital markets by issuance of corporate bonds/TFCs/Sukuks. The Deputy Governor set end-December 2014 as the deadline to incorporate MRC with SECP.-PR
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