HBFC’s planned privatisation amid bankruptcy: Construction industry fears slowdown

[Naveed Yaseen]

Construction industry fears slowdown

Saturday, September 12, 2009
By Samia Saleem

KARACHI: As the reports of bankruptcy and privatisation of the House Building and Finance Corporation (HBFC) in the National Assembly are making rounds, the country’s only institution for providing loans to low-income people for house building, the construction industry fears severe downslide in the industry.

The HBFC, reported to be facing a tough time for the last five years, has announced that a decision has been taken to privatise it, as its (the company’s) 56 per cent loans were not recovered causing a loss of over Rs6.25 billion.

However, builders assert that non-recovery of loans is no excuse for the privatisation of any institution and a body as significant as HBFC should have been given proper governance and attention as it was serving the basic need of providing shelter to the vast lower class population in the country.

“There were not enough policies planned to keep the organization upgraded and was left in the hands of neglect which ultimately resulted into this current state of collapse,” said Babar Mirza the Chairman of Association of Builders and Developers (ABAD).

Although the idea of giving 26 per cent shares of the company to the private sector is still a proposal, the stakeholders and people from the construction industry feel that any action as such would underline grave affects for the construction industry as well as the people who can not afford to take loans from the private sector banks and other financing institutions.

“Giving the shares to the private sector, no matter however little will make the company out of bounds for the low-income group for which the institution functioned to provide for,” said a builder.

The private sector financing institutions in Pakistan are proving loans on high interest rates, which the lower-income group cannot even dream of taking.

Besides, most of these have astringent policies both for attaining and recovery of their loans provided. HBFC thus, is the only state-owned entity providing affordable housing solutions to the non-affording class with socially responsible and commercially sustainable policies.

“HBFC was the only institution providing house building loans to the lower income group of the country who, as a matter of fact, 98 per cent of the banks in Pakistan do not provide for,” said Babar Mirza.

He said that the business of construction was crucially dependant on loans given to the middle and lower-middle class in the way that for people with no collateral assets and low income this was the only platform to achieve loans and back their house building.

Over the years HBFC has not only provided loans on flexible terms with low mark-up rates, and long periods of installments. But has also been very flexible and lenient in terms of recovery of the loans considering the low wage level of its clients. “In the suburbs, HBFC used to provide at least 40 per cent loan for home financing which used to be given to the client and not the builder,” added Babar Mirza. “This way the construction industry of the country was also benefiting as not just the rich but the poor too could think of making heavy investments in house building to improve their living,” added he.

In Karachi alone there are tens and thousands of people who live in Katchi abadis, people who do not have homes of their own and are in constant need of state support to improve their living conditions. There are also millions of those throughout the country who live in rented homes and can’t save enough capital to reserve for any future assets or home financing after meeting their monthly expenses.

Besides, also those who have succeeded to get low-income full time jobs and still do not earn enough to make their own homes are constantly dependant on government support from institutions as the HBFC.

While over the years since 1952 HBFC has provided loans and house building solutions to millions of people from the lower income strata, the current changes in the infrastructure and policies under privatization puts a question mark on the future performance of the institution for the underprivileged class. “With all the other government institutions slowly falling in the arms of privatization there are very few resources left to serve the lower and middle-class people who make most of the total population of the country,” retorted an upset builder.

http://www.thenews.com.pk/daily_detail.asp?id=197904