SECP urges investors to set up house finance companies.

ISLAMABAD: The Secu­ri­ties and Exchange Com­mission of Pakistan (SECP) on Friday called upon investors — including the banking sector — to establish Housing Finance Com­panies (HFCs) for availing benefits of the sector.

As part of its initiative to promote affordable housing in the country, the SECP urged investors to play a forefront role in establishing housing mortgage and housing loan businesses.

At an SECP webinar, organized in collaboration with the Pakistan Mortgage Refinance Company (PMRC) and International Finance Corporation (IFC), SECP Commis­sioner for Specialised Companies Farrukh Sabzwari pinpointed major challenges being faced by the sector.

“The commission would provide handholding to potential investors willing to form HFCs under the Non-Banking Finance Companies (NBFC) regulations,” Mr. Sabzwari said.

He highlighted the significance of the housing finance sector, its overarching link with more than 40 ancillary industries and discussed the opportunities presented by the underserved housing finance market for potential new players.

The SECP had notified amended NBFC regulations in 2020. HFCs are established by the NBFCs.

Under the regulations, an NBFC will determine the housing finance limit, both in urban and rural areas, in accordance with its internal credit policy, creditworthiness, and loan repayment capacity of the borrowers.

While in the case of “Housing Finance” to an individual, the NBFC has to ensure that the total monthly amortization payments of all finance inclusive of housing finance cannot exceed 50 percent of the net disposable income of the prospective consumer. The income of the co-borrower can be clubbed after his/her written consent.

The webinar participants were informed that the NBFC shall take a realistic construction schedule from the borrower before allowing the disbursement of the initial loan limit for the purchase of land or the plot.

The HFC was also responsible for arranging the insurance and takaful of mortgaged property up to the full value of finance in case of the apartment and up to construction cost in case of the house from approved insurance and takaful companies.

PMRC CEO Mudassir H. Khan discussed the role of his company in developing the housing mortgage market.

On the occasion, N K Rupan, an international expert on housing from Malaysia, shared an analysis of the regional markets and highlighted the importance of HFCs in the growth of affordable housing.