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Work on major housing projects halted: HBFCL freezes sanctioning of loans - Naveed Yaseen - 05-27-2009 07:46 AM
MUHAMMAD ALI
KARACHI (May 26 2009): The construction work of all major residential projects has come to a halt, as the House Building Finance Company Limited (HBFCL) has almost frozen loan sanctioning for housing projects and individual owing to liquidity problems.
Insiders told Business Recorder on Monday that all operational activities, which were going on at rapid pace during the tenure of former chief executive of the corporation, Zaigham Mahmood Rizvi, had been stopped for last nine months, due to financial crisis and mismanagement.
They said that despite declaring the current year as "recovery year", the management has failed to produce positive results in this regard. The HBFCL has invested Rs 20 billion through different loan schemes, they said adding instead of earning profit through these schemes, the corporation is suffering huge losses owing to slow recovery operation, excess overheads and mismanagement.
To a question, they said the corporation has almost stopped sanctioning house-building loans to individuals and construction companies to cope with the situation. They said that all loan facilitation services initiated in past including mobile loan service, etc had been stopped because of over expenditures.
The sources said that HBFCL was targeting low and middle income groups for constructing, purchasing and renovation of houses, respectively and worked as housing bank for low and middle-income groups. They said that only 0.4 million houses were being constructed annually against the annual demand of 0.7 million houses to meet, what the government said, a shortage of 7.5 million houses across the country.
They feared that if HBFCL shutdown its operations, shortage of houses would considerably increase, which directly impact the raising ratio of poverty and encroachments, scattering across the country, they feared. Similar apprehensions were expressed by the Association of Builders and Developers of Pakistan (Abad) in its letter sent recently to Prime Minister, Syed Yousuf Raza Gilani.
According to the letter, Abad said that the freezing of capital has left many housing projects, which were at various stages of completion, in an uncertain situation. "The lack of loan disbursement has caused stoppage of construction activities; therefore the possession of residential units to allottees could not take place," it said.
The letter said the government failed in providing assistance to HBFCL as the loan disbursement in 2008 plummeted to some Rs 3 billion against the projected disbursement of Rs 9 billion for the year. However, during the current year, disbursement of loan is very meager, it noted. Abad has requested the government to play its due role and provide financial support to HBFCL to meet housing needs of the country.
The construction industry is playing vital role in the growth of the country's economy, supporting over forty allied industries and is the second largest jobs provider after the agriculture sector, the letter said. When contacted, a concerned official who did not want to be named, dispelled the perception that the company has stopped sanctioning loans.
He said that out of total 35 loan applications submitted by the members of Abad in last five months, majority of the applications has been approved. He said the members of Abad have expressed satisfaction over the performance of the company in a meeting with Azhar A Jafferi. MD HBFCL and added the company has so far disbursed around Rs 35 million loans during current year.
http://www.brecorder.com/index.php?id=1853