Housing finance to GDP ratio less than 1%

[Lahore_Real_Estate]

KARACHI: Pakistan has one of the lowest ratios of housing finance to gross domestic product (GDP) in the world, according to a World Bank report on housing finance for low-income groups in South Asia.

The report said that in contrast to the impressive growth in the banking sector, Pakistan’s housing finance to GDP ratio is as dismal as some of the most underdeveloped countries in the world.

Loans for residential housing and construction amount to less than one per cent of the GDP in Pakistan. This is in stark contrast to India where the same ratio is seven per cent. The housing finance to GDP ratio is between 50 and 70 per cent in developed countries.

The report said that housing finance is out of the reach of low-income groups and housing finance loans are extremely expensive. Housing loans are normally provided to high-income groups and the share of private financial institutions is quite low.

The report said that the inclusion of the private sector is necessary for effective policy-making which can stabilise property rights and land administration prices. A property development framework can develop the building industry and help the residential housing finance market, the report said.

A registration system for mortgage loans was also suggested by the report. The system may be used to upgrade slums in an orderly manner and increase land values and tax collection.