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PRESTON UNIVERSITY

PROJECT
ANALYSIS OF CUSTOMER’S PERCEPTION
TOWARD’S HOUSING FINANCE
FARAH KHAN

2010
PREPEARED BY
FARAH KHAN
2432109008
MBA (ACCOUNTING AND FINANCE)

SUBMITTED TO:

SIR KHALID PAHORE

KARACHI CAMPUS (NORTH NAZIMABAD)

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INDEX
S No. CONTANTS PAGE No.
01 PREFACE 06
02 DEDICATION 07
03 LETTER OF VISIT 08
04 ACKNOWLEDGEMENT 09
05 EXCUTIVE SUMMARY 10
06 INTRODUCTION OF HOUSING FINANCE 14
07 NEED OF HOUSING FINANCE 14
08 RESPOSIBILTY OF GOVERNMENT 14
09 HOUSING FINANCE SECTOR IN PAKISTAN 15
10 ROLE OF STATE BANK OF PAKISTAN IN HOUSING FINANCE 15
11 STATE BANK AND WORLD BANK AGREEMENT FOR WORKING TO GATHER: 16
12 THE IMPORTANCE OF HOUSE FINANCE 17
13 HISTORY OF HOUSE FINANCE IN PAKISTAN 19
14 CENTRAL AND STATE GOVERNMENTS: 19
15 HOUSE BUILDING FINANCE CORPORATION (HBFC) 20
16 INTRODUCTION 21
17 VISION 21
18 MISSION 21
19 THE ROLE OF THE HOUSE BUILDING FINANCE CORPORATION LTD 20
20 FUNCTION OF HBFC: 24
21 INTERNAL AUDIT DIVISION (IAD) 24
22 VISION STATEMENT OF IAD 24
23 MISSION STATEMENT OF IAD 25
24 PROJECT FINANCE 26
25 POLICY & PLANNING 26
26 FINANCE & ACCOUNTS 28
27 TREASURY 29
28 RISK MANAGEMENT 29
29 RECOVERY & SPECIAL PROJECTS 31
30 SONARI BANK
31 COMPARISON OF HBFC WITH OTHER BANKS 35
32 HYPOTHESIS 36
33 LITRATURE REVIEW 39
34 CONCLUSION 54
35 ANALYSIS OF CUSTOMER PERCEPTION ABOUT HOUSING FINANCE 56
36 Thank You 57

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PREFACE:

Pakistan is still a long way from any way closer to

fulfilling the, unsatisfied demand for housing finance
particularly from small to medium categories of housing
loan seeker.

My university has give me that takes of make research

on the topic of costumer perception to housing finance.

This report gives the brief history and the scope of

housing finance sector in Pakistan, the costumer
perception it include the dynamic change which has
been taking place in the housing finance sector in
modern world. There is a huge demand of proper
housing finance institution in Pakistan.

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DEDICATION:-

First of all I am much great full to almighty ALLAH, and

then I want to dedicate this first project of my life to my
beloved parents who encourage me at every stage of my
life.

After that I would like to appreciate the efforts of

university who has given me a great environment to
learn throughout my M.B.A because my all teachers are
very supportive and helpful to me and I am glad to be a
student of Preston University.

I would also like to dedicate my this project to my

cooperative teacher Sir KHALID PAHORE, with whose
help and dedication I have been able to do it well.

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 House Building Finance Corporation
www.hbfc.com.pk Toll free 0800 42325

The Director
Preston University
North Nazimabad
Karachi,

Subject: LETTER OF VISIT

Respected Sir,
Student of university Miss Farah Khan come to our
organization to collect information for her research project.
We have provided her all necessary information regarding
this project.

Thanks Regards.

Branch Manager
House Building Finance Corporation
Gulistan-e-Johar

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ACKNOWLEDGEMENT
I would like to thanks and express my gratitude
firstly to ALLAH whose helping hand kept me
going till end of this final semester project , and
then toward the people who
Contribute in so many ways towards the creation
and completion of this research report.

INSTRUCTOR AND GUIDE:

SIR KHALID PAHORE
FAMILY:
WHO SUPPORT ME IN A MILLION WAYS.
ABU (RUSTAM ALI KAHN)
AME (FARZANA BEGUM)
SISTERS (ASMA,FAIZA,RABIYA,SIDRA)
SPECIALLY
ZAHID MEHBOOB
MY SWEET BROTHER (AHMAD RAZA KHAN)
FRIENDS:
WHO HELPED ME IN THE COMPLETION OF THE PROJECT.
ABDUL JALEEL
AYESHA FARAH
NOREEN GUL
AHMED FARAZ
ROBIN PEATER
ZIA
BILAL

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EXCUTIVE SUMMARY

There is multiplicity of housing related issues in the country,

mainly generated by population explosion. According to the
1998 census, the total number of housing units, throughout
the country, was 19.3 million, 67.7% housing was in rural areas
and 32.3% in urban areas. The overall housing stock
comprised of 39% kuchha houses, 40% semi- pukka houses and
21% pukka houses.

The housing backlog, as estimated according to the 1998

census, was 4.30 million units. The annual additional
requirement is estimated around 570,000 housing units
whereas the annual production is around 300,000 housing
units resulting in a recurring backlog of 270,000 housing units
annually as such the total backlog is currently projected as
over 6 million units.

There continues to be unchecked growth of squatter

settlements, Katchi Abadis encroachment of state and vacant
land which is a direct outcome of the housing
shortage. It is estimated that 50% of urban population now
lives in katchi abadis/slums/squatter settlements.

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 Land suitable for housing is becoming scarce particularly in and
around urban centres.

Land values continue to increase with unchecked tendencies of

speculation resulting in virtual non- availability of affordable
land specially for low income groups.

The Housing stock is also rapidly aging and present estimate

suggest that more than 50% are over 50 years old and rapidly
deteriorating due to general neglect, civic apathy on the part
of the house holds and non-availability of housing finance at
affordable mark-ups.

Shortage of Finance continues to be the major constraint in

housing production, maintenance and growth

The annual disbursement of HBFC loans shall be

enhanced from the present Rs. 1.2 billion to Rs. 7.00 billion
over the next 5 years.

 HBFC and other financial institutions shall formulate packages

of preferential/ concessional markup rates with affordable
system of installments for repayment to provide affordable
credit to low income groups.

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 HBFC shall reintroduce bridge financing and bulk financing of
housing projects through escrow accounting together with
appropriate safeguards.
The foreclosure laws shall be introduced to ensure effective
recovery of loans and advances from the defaulters.
 Simplification of procedures for land transactions and
standardization of mortgage documents to facilitate sale and
purchase of housing
Effective coordination and application of all research
institutions in public and private sectors shall be ensured.
 Housing and construction materials research and development
through special tax concessions and concessional finance shall
be encouraged.
 Bank’s exposure to housing finance has been enhanced from
5% to 10% of their net advances.
 The maximum per party limit has been increased from Rs.5
million to Rs. 10. million.
 The maximum debt-equity for housing loans has been
increased from 70:30 to 80:20.
 Banks have been allowed to deduct upto 3% of the income
arising out of consumer loans for creation of reserve to offset
bad debts in this segment.

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 The maximum loan tenure for housing finance has been
increased from 15 years to 20 years.
 Banks and DFIs are extending credit facilities for balancing,
modernization and replacement of machinery used for housing
and construction industry.
 HBFC has introduced bridge financing and bulk financing for
housing projects through escrow accounting together with
appropriate safeguard.
 HBFC and other financial institutions have formulated
packages of preferential/concessional rates with affordable
system of installments for repayment to provide affordable
credit to low income groups.

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Introduction of Housing Finance
Need of Housing Finance

The basic needs of mankind have been the food, shelter and clothing. Keeping
this in mind, lots of efforts have been made to provide food through the poverty
alleviation programmes since substantial portion of the Pakistani population are still in
the clutches of object poverty.
The poverty alleviation programmers both credit oriented and non-credit
oriented ones described in earlier Units would have thrown light on the efforts taken in
providing food for the poor which is primary among the basic needs. However, it is an
irony of life that a large section of the population in Pakistan and other developing
countries do not afford these needs both in their quantitative as well as qualitative
dimensions. In fact, non-affordability of these facilities is a sign of poverty. This Unit
highlights the need for housing and the efforts taken by the Government in housing.

Resposibilty of Government

The responsibility to provide housing finance largely rested with the Government
of Pakistan till the mid-eighties. The setting up of the National Bank Of Pakistan (NBP), a
fully owned subsidiary of the State Bank of Pakistan (SBP) in 1988, as the apex
institution, marked the beginning of the emergence of housing finance as a fund-based
financial service in the country. It has grown in volume and depth with the entry of a
number of specialized financial institutions / companies in the public, private and joint
sectors, although it is at an early stage of development.
The setting-up of the house building finance corporation(HBFC), a fully owned
subsidiary of the State Bank of Pakistan, as an apex institution was the culmination of
the fulfillment of a long overdue need of the housing finance industry in Pakistan. At

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present, there are about 320 housing finance companies, of which 26 are registered
with the HBFC and which account for 98 per cent of the total housing loan disbursed.

HOUSING FINANCE SECTOR IN PAKISTAN:

Pakistan is still a long way from coming any where closer to fulfilling the un-
satisfied demand for Housing Finance, particularly from the small to medium categories
of housing loan seekers. (State Bank of Pakistan Annual report 2007-2008) In developed
countries, housing finance is one of the main drivers of the economy where percentage
of housing loans to GDP is more than 50 percent.
In developing countries like Thailand, it is about 15 percent and in the South Asia
region, India has corresponding ratio of 6 percent. Pakistan lags far behind with 1
percent. (Annual report state bank of Pakistan).

Role of State Bank Of Pakistan in Housing Finance

SBP is also playing a role in promoting mortgage lending and designing incentives
such as mortgage risk insurance and creating conducive environment for housing
finance activities in Pakistan (Dr. Samshad Anwar, Governor State bank of Pakistan,
2009) During the year 2003, when State Bank of Pakistan introduced regulations to
promote housing finance, the mortgage industry was characterized as highly
concentrated; of the total 14 commercial banks, only 3 held more than 80 percent share
in total outstanding mortgage portfolio. As more banks entered the market, the
concentration of housing finance has reduced, with 9 out of 29 banks now collectively
enjoying more than 80 percent of the share in total outstanding (Executive Directors of
state bank of Pakistan).

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 STATE BANK AND WORLD BANK AGREEMENT FOR
WORKING TO GATHER:

SBP and World Bank have agreed to work together for implementing key
recommendations of HAG and bring about financing environment conducive to growth
of housing sector. The areas in which both organizations want changes are:
restructuring of HBFC, establishment of Mortgage Refinance Company, low cost housing
finance, establishment of an observatory for real estate market and capacity building of
professionals engaged in housing finance through housing experts (Olivier Hassler,
senior housing finance specialist, World Bank Washington).
In addition to initiatives taken to institutionalize both project and house
financing, SBP realizes that a simultaneous development of human capital will play a
critical role in ensuring sustainability of project and house financing. A cooperation
agreement was signed with International Finance Corporation (IFC); the private sector
arm of the World Bank Group and SBP to launch housing finance training program in
Pakistan. The training intends to cover all aspects of housing finance from product
development, loan marketing/distribution and origination to loan underwriting,
servicing and risk management. Staff of both banks and non-bank financial institutions
associated with mortgage lending business benefited from this. First session of training
was conducted in December 2007 in SBP Karachi and second session in May 2008 at
NIBAF Islamabad.

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 The Importance Of House Finance

The financing is an important part of buying a house.

Some people get in a lot deeper than they expect to. Read all the fine print in the
contract before signing.

How large are the monthly payments?

How many years do you have to keep up the payments?

Are the payments arranged to include the taxes and the fire insurance, as well as the
principal and interest?

What is the interest rate? Can the entire amount be paid up at any time?

When you sign up to pay monthly for 25 years, remember that 25 years is a long time to
make payments.

Sometimes people have to continue renting because they can't get enough money
together to make the down payment.

Where do people get building money, anyway?

Most of them borrow it. Ordinarily you can't borrow very much, unless you have some
money of your own to start with.

There are two ways to get money together.

One way is to earn more, the other is to spend less. At first glance earning more might
seem to be the better, but since most people spend up to the limit of their earnings,
actually the only way to save money is to spend less.

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This is often difficult, but seldom impossible, if people really make up their minds to
hang on to their money to get enough together for a worth-while project like getting a
house.
If you postpone spending money as long as possible, often the need for spending it
passes, and the money can be left in the savings account.

Incidentally, money kept in the purse or around the house will always get spent
somehow. The only way to get money together to start building a house is to save it in a
bank. It is very difficult to get a loan unless you have the lot paid for.

Even if sometimes you might borrow from a rich relative, often the thing that made him
rich prohibits him from lending it to you, that is, his good business sense. If for some
reason or in some way you come into possession of a few thousand dollars, don't fritter
it away, or buy a new car; go out and buy a good building lot with it. If you later decide
not to build, you can sell the lot, usually at a handsome profit. During the last hundred
years, money invested in good land has increased in value faster than almost anything
else, when it comes to the long steady pull.

Land has always proved to be a good investment, and as the population increases, it
becomes scarcer owing to the increased demand and should go up in price. Be sure to
select your location with care, usually in the direction of growth. Poorly located land
may decrease in value.If you are lucky and have a few thousand dollars or a lot paid for,
you can usually borrow what money you need to solve your housing problem. Often
since it is not possible to borrow enough money on a first mortgage, or trust deed, to do
all you want to do, a second mortgage is necessary.

This second mortgage usually runs from three to five years, whereas the first mortgage
runs from ten to twenty-five years or more. Always use a mortgage calculator to help
you get the best mortgage possible, this will save you a great deal of money in the long
term.

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 History of House Finance in Pakistan

In Pakistan many agencies and banks are involved to lend housing finance to
homebuyers. Different commercial banks provides funds to housing sector through its
refinance scheme for banks, housing finance companies and state level corporation and
housing finance societies. House building Finance Corporation's double protection plan
is a safeguard against the unpredictability’s of life and free accident risk cover protects
the borrower's family against dispossession of the house. In addition to housing finance
institutions and banks, financial assistance is also available for home-buying against
different deposits with banks in Pakistan and security of different bonds that issued by
State Bank of Pakistan.

CENTRAL AND STATE GOVERNMENTS:

Till the mid-eighties, the responsibility to provide housing finance rested, by and
large, with the government. The Central and state Governments indirectly support the
housing building effort. The Central Government has introduced, from time to time,
various social housing schemes. The role of the Central Government visa-versa these
schemes is confined to laying down broad principles, providing necessary advice and
rendering financial assistance in the form of loans and subsidies to the state
governments and union territories.

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 House Building Finance Corporation (HBFC)

The Central Government has set up the HBFC to finance and undertake housing
development programmes, development of land for satellite towns, besides setting up
of a building materials industry.The Central Government provides equity support to the
HBFC and guarantees the bonds issued by it Apart from this, both Central and state
Governments provide house building advances to their employees.
While the Central Government formulates housing schemes, the State Governments are
the actual implementing agencies.

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 Introduction

The House Building Finance Corporation (HBFC) (now incorporated under companies as
"HBFC Ltd." ordinance 1984 since July, 2007) was established in the year 1952 as a
Statutory Federal Body with the object of providing financial assistance for construction
and purchase of houses to the people of Pakistan in urban as well as rural areas. With its
establishment, the concept of institutionalized housing finance was introduced for the
first time in Indo-Pak sub-continent for providing long term finance for house building.

Vision

To be the prime housing finance institution of the country, providing affordable housing
solutions to low and middle income groups of population by encouraging new
constructions in Small & Medium Housing (SMH) sector.

Mission

To be a socially responsible and commercially sustainable housing finance institution.

Target market – Low income and middle income groups of populations
Target areas – No negative list, all legalized residential locations
Responding to housing needs of low income groups is a social responsibility,
beyond that everything has to be 100% commercially viable and sustainable to ensure
an on going housing finance entity.

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 The role of the House Building Finance Corporation Ltd

The role of the House Building Finance Corporation Ltd remained everlasting for
refurbishing the housing finance sector of the country. As-such, the Management of HBFC
Ltd always remained eager to introduce prudent housing finance policies, according to
market demands, to suit the need of the people of the country and to provide affordable
housing finance facilities to play a much bigger role to become a socially responsible and
commercially sustainable house financing entity of the country.
This product is based on the concept of Diminishing Musharaka and has four modules for he
following purposes:-
(i) Purchase of a residential property
(ii) Construction of residential property
a. Residential construction on Applicant’s owned land;
b. Residential construction on applicant’s owned house (on advance stage of
Construction i.e. up to lintel level or Roofed)
(iii) Renovation of an existing residential property
(iv) Replacement of an existing housing finance (Balance Transfer Facility)
This scheme facilitates customer for purchase/construction/renovation/BTF of house/flats.
The salient features of the scheme are:-
Maximum Ceiling:
1- Financing facility up to Rs.7.5 million for purchase/construction/Balance Transfer
Facility subject to the customer’s eligibility & location of house/flat. For renovation
maximum financing limit up to Rs.2.5 million.
2- The investment is repayable in affordable installments over a maximum period of 20
years depending upon the customer’s age and repayment ability.
3- The overall cost in acquiring housing under the scheme is moderate as compared
with other banks.

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4- Early unit purchase option after the lock out period (lock out period means first 3
years during which advance units purchase to the customer is prohibited). After
lock-out period the customer can purchase as many number of units as the
customer wishes, subject to prepayment charges. By making advance payment, the
customer will avail two benefits i.e. get revised and reduced his/her monthly
installment on lower side or get reduced the period of loan.
5- Security: equitable

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 FUNCTION OF HBFC:

Internal Audit Division (IAD)

The core function of Internal Audit Division (IAD) is to provide assurance to the Audit
Committee and the Management that the internal control risks in the Corporation are
understood, managed and mitigated properly. It carries out its function through review
and monitoring of activities of various functions of HBFC Ltd. in compliance with their
documented procedures and polities of Board of Directors, and according to the
International Standards for the professional Practice of Internal Auditing. It is free and
independent in its function.
The structure of the Division is as follows;

 Pre-Audit Section
 Post-Audit Section
 Zonal Audit Coordination Section and
 Commercial Audit Section

Vision Statement of IAD

Internal Audit Division's vision is to see the Division as a dynamic and vibrant one,
resting at the zenith of professional excellence, providing highest level of comfort to
both the management and the auditees in their respective spheres.

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 Mission Statement of IAD

Internal Audit Division's mission is to provide a wide range of quality audit services
aimed to value addition and improve the Corporation's operations with a view to
achieve the Corporation's overall mission and the management's objectives of
improving the efficiency and effectiveness of risk management, control and governance
process.

System and Compliance Division is primarily responsible for.

 HBFC Ltd. operates in accordance with State Bank of Pakistan's various rules and
regulations in letter and spirit
 Supervision and monitoring of transaction with reference to Anti
Money Laundering and know your customers
 Implementation of SBP Guidelines relating to Prudential Regulations
 Ensuring timely submission of accurate data/returns to Regulators
 Submission of compliance status relating to SBP Inspection Report
 Supervision and monitoring of SBP directives relating to CIB
 Follow-up and providing information to SBP/NAB/NADRA about freezing of bank
accounts and financing facilities

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 Project Finance

The Project Finance Division (Wholesale Credit/ Bulk/Bridge Finance) is headed by Mr.
Nadeem Rafi Khan, Executive Director.

The Project Finance Division (Wholesale Credit/ Bulk/Bridge Finance) covers the
financing of housing projects of Housing Societies and Projects /Complexes developed
by ABAD members and others. This also includes projects consisting of more than one
housing units of bungalows, flats, duplexes etc.7

This Division covers monitoring and coordination of all Project Finance-Bulk Credit
Operations.

Policy & Planning

The Policy & Planning Department functions under the direct supervision of the
Managing Director and performs the following functions:-

 To review the loaning policies of HBFC Ltd, simplification of procedures and

identification of issues such as the reasons of default & high-infected portfolio
and pinpoint the policy mistakes which resulted for accumulation of such
default/bad loaning. Suggests remedial measures and ensure that such a
mistake may not occur in the existing/forthcoming schemes;
 Asset planning i.e. Product line, Product mix, segments to be targeted, pricing of
products.
 To undertake comprehensive research about the activities of its competitors
and competing products with full details about their pricing, salient features of
the products etc.
 To evolve strategy/planning for marketing the new corporate financing facilities
to Universities/Hospitals/Educational Institutions/Labor Colonies.

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 To facilitate floatation of the liability side products for HBFC Ltd., such as REITS,
MBS, Bonds (Sukook Bonds) and COIs.
 To have a close liaison with Treasury Department about pricing of HBFC Ltd.’s
REITs, Securitization etc.
 Exploring the opportunities of syndication and negotiation of terms.
 To develop a housing observatory by undertaking research on the Socio-
economic side of the housing and develop a data bank containing trends during
the last two decades relating to :-
o Income Statistics;
o Distribution of Income;
o Cost of construction of houses/flats in urban/rural areas;
o Average cost material;
o Price Index;
o Income Affordability of various classes and their variances;
o Per Capital Income;
o Classification of Income;
o Construction Cost Index;
o Land Prices Trends/index;
o Housing Occupancy Ratio;
o Ratio of land/cost of construction.
 Compilation of operational Circulars by way of master circulars to make these
one updated & user friendly document;
 To examine the possibilities for curtailing unnecessary documents ensuring that
these do not jeopardize the interest of Corporation

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 Finance & Accounts

The Finance & Accounts Function at HBFC Ltd. is entrusted with crucial responsibilities
relating to overall generation and maintenance of HBFC Ltd.'s financial records,
statements and transactions. It ensures their availabilities and reliabilities at all time.
The financial statements of HBFC Ltd. are required by a wide range of internal and
external stakeholders to arrive at a correct picture of financial position & performance,
especially that relating to the organizational Cash-Flows. Without this, rational decision-
making by the stakeholders would be impossible.
Currently F&A function is engaged in thet development of a new ERP, that will be
integrated with all the operational and reporting functions of HBFC Ltd. to facilitate the
bench mark for a state-of-the art Management Information System (MIS).

Treasury

Primarily what the Treasury Division of HBFC Ltd. does is to mobilize resource
and convert them into optimum earning assets by availing all possible opportunities
existing in the domestic financial markets. Apart from this, it is actively involved in
rationalizing banking costs through the following activities in domestic financial markets:

 Inter-bank borrowings/placements
 Buying/Selling of Securities
 Issuance of COIs
 Equity Financing
 Spread Transactions

Insha-Allah HBFC Ltd. will be a big player in both Capital as well as Money
markets in Pakistan.

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 Treasury

Primarily what the Treasury Division of HBFC Ltd. does is to mobilize resource
and convert them into optimum earning assets by availing all possible opportunities
existing in the domestic financial markets. Apart from this, it is actively involved in
rationalizing banking costs through the following activities in domestic financial markets:

 Inter-bank borrowings/placements
 Buying/Selling of Securities
 Issuance of COIs
 Equity Financing
 Spread Transactions

Risk Management

After reorganization the need for Risk Management and complying guidelines of State
Bank of Pakistan, this division was established under in House Building Finance
Corporation at Head Office Karachi under the supervision of Ms. Sarwat Gilani in July
2005. Being an imperative unit, Risk Management Division is engaged in formulation
and implementation of policies for managing major risk faced by the corporation
including Price, Interest Rate, Credit, Liquidity, Market and Operational Risks. We are in
process of devising and implementing a structure for identifying, assessing, monitoring
and reporting of these Risks. Our target is to add value to our organization by assisting
the management in decision making process in the shape of analytical risk reviews and
reports.
The following activities are carried out on regular basis:

 Formulate Policies and Guidelines for managing all the Risk Categories
mentioned above. These policies need to be approved by the Board and

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 implemented at all level for the organization.
 Introduce an Integrated Risk Management Structure within the organization. The
structure should clearly define scope of work and responsibilities related to risk
for individuals and various oversight committees like ALCO, Credit Committee,
Risk Management Committee etc.
 Introduce and implement Internation Best Practices for risk management to the
extent they can be practically adopted given the environment, nature and size of
the organization.
 Implement and fulfill all the requirement of State Bank of Pakistan as outlined in
Risk Management Guidelines for Commercial Bnaks & DFIs and circulars issued
from time to time.
 Implementation of Basel II. Developing a Road map and strategies for its
implementation.
 Facilitate management in business decision by providing analytical and
conceptual risk reviews as and when required.
 Review all the assets and liability product and issue risk review for the same
before finalization.
 Keep update of latest techniques, market information and requirement of
regulatory international bodies related to risk management.

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 Recovery & Special Projects

During 2006, NPL’s have been assigned to the newly created Special Assets
Management Division and servicing of loans remain with Recovery Division. During the
year SAM & Recovery Division recovered an amount of Rs. 3.8 billion.
In March 2007, the Recovery Division and Special Asset Management Division have been
merged together and named as Recovery Division. Two distinct Departments i.e. “Loan
Servicing” and “Default Management” are working under the Recovery Division.
The overall recovery operations is continue to be separated in to “ Loan Servicing”
involving collections on current accounts and “ Default Management” covering
management of default/non-performing loans.
These surveillance and recovery measures indeed ensure the viability of the institution
as a “going concern”.

Record recoveries were made during the years 2005 and 2006 , as under:-
1. 2005 Rs. 3 billion
2. 2006 Rs. 3.842 billion
The years 2006 and 2007 have been declared “Years of Recovery”.

3-Commercial bank
A-Sonari Bank

Purpose

 Purchase / Construction of Property for self-occupancy.

 Extension / Renovation on self occupied residential Property.

Product Categories

 Purchase of pre-constructed Residential Property.

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  Construction of residential property on self owned plot of land.
 Extension / Renovation on self owned & occupied property.
 Balance Transfer Facility (BTF) for any of the above finance.

Eligible Borrowers*

 Salaried Persons
 Self Employed Professionals
 Business Persons

Financing Amount

 Purchase Rs.Up to 10 Million

 Construction Rs.Up to 10 Million
 Extension / Renovation Rs.Up to 03 Million
 Balance Transfer Facility Rs.Up to 10 Million

Tenure

 Purchase Up to 20 Years
 Construction Up to 20 Years
 Extension / Renovation Up to 07 Years
 Balance Transfer Facility Up to 20 Years

(Calculated from the date of original fi nance)

Mark-up Rates**

 1 Year KIBOR + 4% p.a., to be revised on each anniversary of finance.

Processing Fee

 Rs. 2500/- or 0.50% of the finance amount whichever is higher (refundable where case is not

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 approved).

Service Length

 Minimum 5 years of confirmed service with present employer in case of salaried persons.

Age

At the time of maturity of the Finance applicant's age must not be more than;

 60 years in case of Salaried persons

 65 years in case of self Employed / Business persons

Debt Burden

 Monthly repayment installments not to exceed 40% of the net take home salary or 40% of
declared monthly income (taking into account other financing facilities availed from other
banks/DFIs).

Moratorium

 A moratorium of 12 months is allowed in case of finance for Construction.

Pre-Payment/ Partial Prepayments

 In case of Partial Payment / Balloon Payment / Full adjustment, no penalty will be charged.

Late Payment Charges

 Rs. 500/- per Installment per month.

Insurance

 Mortgage Protection Insurance cover through Bank’s designated Insurance Company.

33
FARAH KHAN
  Insurance premium on the insurance cover payable upfront each year.

Charges

 Documentation Charges at actual

 Valuation Charges
 Legal Opinion Charges
 Income Estimation Charges

34
FARAH KHAN
COMPARISON OF HBFC WITH OTHER BANKS
Banks Services Percentage
Meezan Bank Meezan Easy Home 9
House Building Finance Corporation (HBFC) Ghar Aasan (Flexi) Scheme 3
MCB Bank Limited Apna Ghar Pyara Ghar 15
Standard Chartered Bank (Pakistan) Limited Home Purchase 16
Soneri Bank Pakistan Limited Soneri Ghar Financing 18
Askari Bank Limited Mortgage Finance 14
United Bank Limited UBL Address 17
Different Banks Home Finance 8

COMPARISON OF HBFC WITH OTHER BANKS

Different Banks Home Meezan Bank Meezan
Finance Easy Home House Building
8% 9% Finance Corporation
(HBFC) Ghar Aasan
(Flexi) Scheme
3%

United Bank Limited

UBL Address MCB Bank Limited
17% Apna Ghar Pyara Ghar
15%

Askari Bank Limited

Mortgage Finance
Standard Chartered
14%
Bank (Pakistan)
Limited Home
Purchase
16%
Soneri Bank Pakistan
Limited Soneri Ghar
Financing
18%

35
FARAH KHAN
 HYPOTHESIS & OBJECTIVES OF THE
PROJECT
My objectives in this project are as follows:

1. What is the customer’s perception about housing finance ?

2. Why do people hesitate about housing finance ?
3. What are the risks of housing finance? Is it useful to them or not ?
4. What problem are they facing during housing finance ?
5. I will analyze that why do people need to do housing finance instead
of buying?
6. Why do people depend on institutions of housing finance?
7. Are the Government policies reliable for housing finance ?
8. How are the services of housing finance to their customers ?
9. Which kind of work does housing finance perform sector in Pakistan?
10.What is the role of State Bank in housing finance ?
11.What is the problem faced by a customer for a buying a property ?
12. What are HBFC Policies to issue the loan to a customer ?

36
FARAH KHAN
CONCLUSION :-

Housing finance is not an easy task for every

person who wants to finance a house; it’s very tough if
you are not aware of it.

In my topic customers perception to housing

finance I came to know that HBFC is doing excellent job
in their services to customers because customers are
much satisfied with their services , they having a place in
customers heart that is a good sign , and its need to
know to other customers my research is much helpful to
prefer HBFC for their housing finance as compare to
banks, banks are need to be more flexible for having
their faith in customers because increasing interest rate,
under tightening monetary expansion scenarios, will
only benefit home buyers in the upper income society
and not for the lower income customer, so the
government has settled up the HBFC a fully owned
subsidiary of state bank of Pakistan, as an apex institute
is fulfilling a long overdue need of housing finance
industry in Pakistan.

37
FARAH KHAN
 The HBFC is fulfilling their vision to be the prime
housing finance of Pakistan providing housing solutions
to low and middle income groups of population by
encouraging new construction , and their mission to be a
socially responsible and commercially sustainable
housing finance institution is also working because in all,
costumers having faith on them , they are set to be a
reliable name in the housing finance and throughout my
research , I could prefer customers that they will do their
house finance by them because they have reliable name
and their services are good and my research conclusion
is also that, a customers could believe on them, and by
my research maybe wrong perception of customers
toward house financing may decrease.

38
FARAH KHAN
ANALYSIS OF CUSTOMER PERCEPTION ABOUT HOUSING FINANCE
Name

Age Occupation

Q1 : Have you ever borrowed loan from HBFC ?

YES NO
Q2: Are you satisfied abut process of application of loan ?
YES NO
Q3: Is the beneficial of HBFC loan for you ?
YES NO
Q4: What do you suggest about interest on loan it should be ?
Less then 5 % 10%
15% No Interest
Q5: Is HBFC better then other financing bank ?
YES NO
Q6: What should be minimum and maximum loan ?
1 lakh to 10 lakhs 5 lakhs to 15 lakhs
15 lakh to 1 Million Customer's Stength
Q7: Is the repayment for the loan is suitable for you ?
YES NO
Q8: Are you in favour of housing finance ?
YES NO
Q9: HBFC should change their rule and regulations ?
YES NO
Q10: What should be procedure of income estimation ?
Property Salary
Goodwill Or any other
Q11: If Company is giving the loan so property should be insured ?
YES NO
Q12: How much time period should be good for you to repay the loan amount?
Mothly Semi Annually
Yearly As per Customer's wish

39
FARAH KHAN
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ANALYSIS OF CUSTOMER PERCEPTION ABOUT HOUSING FINANCE

Name

Age Occupation

Q1 : Have you ever borrowed loan from HBFC ?

YES NO

Q2: Are you satisfied abut process of application of loan ?

YES NO

Q3: Is the beneficial of HBFC loan for you ?

YES NO

Q4: What do you suggest about interest on loan it should be ?

Less then 5 % 10%

15% No Interest

Q5: Is HBFC better then other financing bank ?

YES NO

Q6: What should be minimum and maximum loan ?

1 lakh to 10 lakhs 5 lakhs to 15 lakhs

15 lakh to 1 Million Customer's Stength

Q7: Is the repayment for the loan is suitable for you ?

YES NO

Q8: Are you in favour of housing finance ?

YES NO

Q9: HBFC should change their rule and regulations ?

YES NO
Q10: What should be procedure of income estimation ?

Property Salary

Goodwill Or any other

Q11: If Company is giving the loan so property should be insured ?

YES NO

Q12: How much time period should be good for you to repay the loan amount?

Mothly Semi Annually

Yearly As per Customer's wish