According to the World Bank Group, existing and new housing finance players can generate an additional $3.8 billion in loan volume in the mortgage finance sector, which would then be used to serve approximately 0.5 million customers.
There is a significant demand for housing units from Pakistan’s low-income segment, according to the International Finance Corporation (IFC), a member of the World Bank Group, in its most recent research, “Pakistan Housing Finance, Is there a business case for financial institutions?”
The supply is currently very small, nevertheless. Only 1% of the housing stock is available to the 68% of the population with monthly incomes up to $188.
According to the research, the majority of the housing supply is oriented at the high-earning class in accordance with commercial viability and affordability.
12 percent of the populations, who make an average monthly income of more than $625, are served by about 56 percent of housing units. According to the report, Pakistan could experience growth in the housing finance sector.
The research also emphasizes that, despite a low national mortgage-to-GDP ratio, financial institutions can only offer mortgage finance products in Tier 1 cities.
According to the report, mortgage financing may be extended to 26 cities with the right products, systems, and money, with the potential to reach up to 500,000 additional clients in various economic classes.
The lack of affordable housing supply, problems with land titling, registration, administration, and record-keeping, a lack of medium- to long-term funding, the lack of established capital markets for raising long-term funding, and the limited ability of financial institutions to provide and manage housing finance are among the difficulties noted in the report.