INTRODUCTION
The House Building Finance Corporation was established in 1952 under an act of the parliament (Act XVIII of 1952) to finance construction of house in the urban areas of Pakistan. Its operations started from the city of Karachi and were later on extended to other cities and towns. While the Corporation played a vital role in the field of housing, its progress remained restricted due to budgetary limitations. It was in the year 1973 that the financial allocation of the Corporation were increased and its charter and scope of activity was extended which enabled the Corporation to raise more funds, accept term deposit, extend loans to rural areas natural calamities, increase the lending period to 25 year. lend for purchase of house finance development authorities and important trust for development of plots, housing projects and even participate directly in construction and management of houses for sale to public. This revolutionized the operative potential of the Corporation but a major revolution in its working came in 1979 when a new scheme of housing finance on income sharing basis replaced the old interest bearing loading scheme.
As a result of promulgation of Islamic laws in Pakistan, the HBFC has introduced a revolutionary scheme of ‘Housing Finance on Income Sharing Basis’ thereby eliminating interest on its loans. This scheme aims at providing credit facilities for construction / purchase of a housing unit by becoming a partner in the venture in proportion to its investment. This joint-owner ship terminates as soon as the partner repays the entire investment, together with income deriving there from. Such investment by Corporation includes the cost of land. The Corporation continues to share the rental income proportionately during the life of the joint ownership. The Corporation makes the arrangement for the survey of the places for determining the cost of construction, rental rate, and cost of land prevalent in various localities of a city or town. The result obtained as the consequence of survey / assessment enables the Corporation to maintain the rates of profit with in a limited range so that the house builders, particularly the low income groups, are not over-burdened. This new scheme has not only done away with interest, but has also lessened the burden of heavy repayment on the house builders. More over the possibility of constructing big and palatial houses has also been checked and discourage.
SALIENT FEATURES OF THE SCHEME
The following are the salient features of this scheme:
- The maximum limit of investment is one million rupees.
- The Corporation does not finance the housing units beyond the covered area of 2250 square feet.
- The financial assistance can be availed only once in the life time of house builders.
- The interest bearing loans are not converted in to investment under this scheme.
- The period of the repayment is 15 years, divided into 5 cycles of 3 years each. The Corporation’s profit / share in rental income are reduced after repayment of 36 installments at the end of each cycle.
- The repayment in each individual each begins after the completion of the agreed period of 9 months of 12 months, as the case may be, or three months from the date of drawl of final installment whichever is earlier.
CAPITAL
In addition to share capital of Rs. 125 million, the capital resource of the Corporation comprise the state bank loans (Rs. 2,435 million), debentures (Rs. 23.3 million), and Government loans (Rs. 438.3 million).
MANAGEMENT
The affairs of the Corporation are directed and supervised by a Board of eight Directors appointed by the Federal Government as under:
- Two Directors from amongst the officials of Federal Government.
- One Director on the recommendation of the State Bank of Pakistan.
- Four directors, one from each province, on the recommendation of the respective Provincial Government.
- The Managing Director,
ELIGIBILITY FOR LOANS
The Corporation advances loans where the applicant holds a clear title of the property and his monthly income, as also of the guarantor, is sufficient to repay the loan with in the prescribed period. The applicant should also have the permission of the competent authority for Corporation’s becoming a partner in the land and the house to be constructed with its financial assistance.
The borrower is required to submit an application on the prescribed form obtainable from the office of the Corporation at the rate of Rs.1/-per form along with the following documents/information:
1. INFORMATION
a) The assessment of cost of land and the cost of construction.
b) Gross and net rental income of the property.
c) Share of the Corporation in the net rental income in consideration of the loan.
d) Corporation’s share in capital gains, if the property is sold or transferred during the currency of Deed of Assignment and Partnership.
e) Levying demand charges in case of default as per repayment schedule.
f) Fixation date of completion of house.
The following fees shall be payable to the Corporation along with the application:
1. Application fee at the rate of one rupee per thousand rupees on the amount of loan being applied for.
2. Inspection fee at the rate of one rupee per thousand rupees on the amount of proposed loan.
3. Insurance fee at the prescribed rate.
All fees are to be deposited with any authorized branch of Muslim commercial Bank.
2.DOCUMENTS
a) Sale deed/lease deed/gift deed etc. to prove ownership.
b) A copy of the relevant page from jamabandi /survey sheet.
c) Alienation certificate.
d) P.T.D/P.T.O.
e) Non-encumbrance certificate.
f) Site plan of the house, duly approved, with permission.
g) Permission of the competent authority for assignment of property.
h) In case of lease:
i) Proof of income.
ii) A copy of National Identity Card.
iii) Agreement.
1. If the loan is required for construction of a house, information about the cost of the plot according to the sale of deed etc., area on which construction has already been made, proposed area for construction, stage of the construction work and the amount of loan needed from the Corporation, has to be provided to the Corporation.
2. In the case of loan for purchase of a house, all necessary particulars/details of the house, including the cost; approved constructed area, total area, number and date of letter regarding approval of the site plan, and the amount of loan required, have to be provided. In addition to the above mentioned documents /particulars, the Corporation would also required the borrower to supply the following information:
1. If the plot /house are or have been the subject matter of litigation and if yes, details should be given.
2. Whether the plot / house are under any encumbrance and if so necessary details should be provided.
3. Has the borrower previously secured any loan or investment on profit sharing basis? The details should be given.
4. Details of loan/investment obtained from Corporation by anyone of the dependents of the borrower.
5. If the borrower wants to assign, along with the property in question, any other property or property in lieu of the house / plot in question, its particular should be given.
6. Details about bank, branch, account number act, etc where the borrower want to deposit the installments of the loan/investment.
SECURITY FOR INVESTMENT
The land/house shall be assigned to the Corporation in the prescribed form of Assignment and Partnership. It shall be duly registered with the Local Deputy Registrar and all the expenses involved, including stamp duty, registration fee etc., are to be borne by the borrower / proposer.
COVERED AREA OF THE HOUSE
The Corporation does not provide financial assistance for a housing unit having a covered area of more than 2250 sqr.ft. The maximum amount of investment admissible is calculated by multiplying the proposed covered area of a housing unit by the following:
1. Pucca house with RRC roof: Rs. 80/- per sqr.ft.
2. Pucca house with out RRC roof: Rs. 50/- per sqr.ft.
3. Multi-storied apartments: Rs. 70/-per sqr.ft.
The maximum limit of investment is rupees one lac.
PAYMENT
After the loan/ investment have been sanctioned, the amount is released in installment concomitant with construction of house as under:
First installment: On completion of plinth.
Second installment: At roof level.
Third installment: After casting of roof.
In the case of purchase of housing unit, the investment is released in lump sum.
REPAYMENT CAPACITY
1. BASIS
The repayment capacity of a borrower/proposer calculated on the basis of his/ her regular income and the anticipated rental income of the house according to the following formulae:
a) SHARE OF THE INCOME:
i) For person with monthly income up to Rs. 500/-: 15%
ii) . . . . . . . . . . . . between Rs. 501/- : 20%
and Rs.1,000/-.
iii) . . . . . . . . . . . . between Rs. 1001/- : 25%
and Rs.2,500/-.
iv) . . . . . . . . . . . . . above Rs. 2,500/- : 30%
b) If the amount of investment is Rs. 20,000 or below, the total anticipated rental income is taken into consideration irrespective of the monthly income of the proposer. If the amount exceeds Rs. 20,000 the anticipated rental income of house is taken into account to the extent of the share of proposer’s income as detailed in (a) above.
2. BOOSTING REPAYMENT CAPACITY
A benefit to the extent of 50 percent of the proposer’s income is given where a guarantee is provided to boost the repaying capacity. The Guarantor’s income in all cases should not be less than the proposer’s income.
The persons who are solely dependent on the income of others e.g. husband / wife, parents/ children can apply for investment on the basis of guarantee of their supporters. Where the parents / children, husband / wife are both earning of the family, joint income of husband and wife or father / mother and one of the children can be accepted provided the guarantor signs the letter of guarantee. An attorney may also apply in his own name on the basis of his own income only, if the owner of property is residing abroad or is serving in another province of Pakistan.
3. MODE of REPAYMENT
a) The investment is repayable in180 installments comprising the principal amount and Corporation’s share in the rental income. The amount of principal is distributed over the period as per schedule given below:
Ist Cycle : Rs. 4.30 per thousand rupees of investment per month.
IInd Cycle: Rs. 4.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IIIrd Cycle: Rs. 5.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IVth Cycle: Rs. 6.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vth Cycle: Rs. 7.720 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Each cycle comprise 36 monthly installments.
b) The market rates, determined through survey of various localities in different cities and towns carried out by an authorized agency are taken into consideration for calculating the rental income. The renal income is subject to revision after every three years.
c) The net rental income and share of the Corporation are calculated according to the following method :
I) COST OF LAND
Total area multiplied by prescribed cost of land.
II) ESTIMATING TOTAL COST OF HOUSING UNIT
Proposed covered area of the plot multiplied by the prescribed rate of construction per squared feet.
III) ESTIMATING TOTAL COST OF HOUSING UNIT
Cost of land as at (I) above and estimated cost of construction as at (II) above.
IV) GROSS ANNUAL RENTAL INCOME
Covered area of plot multiplied by prescribed rental per square feet.
V) PROPERTY TAX
As leviable by the Government from time to time.
VI) NET ANNUAL RENTAL INCOME
Gross annual rental income less property tax, less maintenance allowance equal to one month gross rental income.
VII)ANNUAL SHARE OF THE CORPORATION IN THE RENTAL INCOME
Net annual rental income multiplied by investment of the Corporation and divided by total estimated cost.
VIII) MONTHLY SHARE
Annual share divided by twelve.
XI) MONTHLY REPAYMENT INSTALLMENTS
Principle as given at (3) (a) above plus share as given at (c) (vii).
The Corporation’s share on its investment payable by the partner varies from house to house and from locality to locality but burden on the partner is certainly less as compared with the existing interest rates.
OTHER FEATURES
- Investment can be made with a partner for additional construction where the property is already mortgaged / assigned to the Corporation provided the repayment of previous loans/ investment is quite regular and the total amount of out standing loans/ investment and the covered area do not exceed the permissible limits.
- In the case of house purchase, the repayment starts from the first of the month next following registration of Assignment Deed.
- Investment for house purchase is allowed only if the house is less than six years old from the date of the first approved plan.
- The monthly installment shall be repayable by the partner without regard to any loss of rental income. If the partner makes any default in repayment of monthly installment, the Corporation shall issue demand notice and also recover the following charges:
Investment up to Investment above
Rs. 50,000 Rs. 50,000
a) Default exceeding one Rs. 10/-per notice Rs. 25/-per notice
month and up to three
months.
b) Default exceeding three Rs. 20/-per notice Rs. 50/-per notice
months and up to six
months.
c) Default exceeding six Rs. 40/-per notice Rs. 50/-per notice
months and up to twelve
months.
d) Default exceeding twelve Rs. 60/-per notice Rs. 125/-per notice
months.
5. A house constructed or purchased in partnership with the Corporation shall not be eligible for re-financing. Such a house may be disposed off with the prior permission of the Corporation provided the price is reasonable and proportionate gain is paid to the Corporation.
6. The Corporation shall share the losses caused by natural calamities, war or civil commotion only.
REVIEW OF PROGRESS
The rate of growth of loans advanced by the Corporation during the period for 1975 to 1980 was 23 percent of the total credit facilities provided by three institutions namely the Corporation, the Government (for its employees) and the nationalized commercial banks. During the period from July 1980 to March 1981, the Corporation sanctioned loans amounting to Rs. 901.8 million. The following statement will show the amounts of loans disbursed during the last six years:
( Rs. in million)
Year Amount of loan
1975-76 359.3
1976-77 573.3
1977-78 371.4
1978-79 525.2
1979-80 813.2
1980-81 (July-March) 901.8
ACTIVITIES
1. The Corporation is undertaking construction of houses, particularly for Pakistani nationals residing in foreign countries. It has already acquired land measuring 200 kanals from Lahore Development Authority for construction of houses in Lahore under the ‘Faisal Town Scheme’. The planning and designing initially have done. The scheme aims at constructing 350 houses with a covered area of 2042 sqr.ft. each. This colony will have a community buildings, mosque, primary school and shopping centre.
2. Under the directive of the President of Pakistan, the Corporation prepared a scheme of Housing Finance on income sharing basis. Under this scheme, the Corporation makes investment for construction and purchase of houses in partnership with the constructors/purchasers against assignment of land and building thereon and agreement to allow the Corporation to have a share in rental income of the property assigned to the extent of its share in investment.
3. the Corporation approved 18,272 investments to the tone of Rs. 901.8 million, during the period from July 1980 to March 1981, with the following regional break-up:
S.No Region/Province Number of investments Amount (in million).
1. Punjab 4,106 234.8
2. Sind 1,761 115.8
3. Baluchistan 125 8.5
4. N.W.F.P. 973 59.9
5. Azad Kashmir 149 10.2
6. Islamabad 333 25.6
7. Other than Islamabad 1,367 72.8
8. Karachi 6,207 363.5
9. Flood 3,251 10.7
Total. 18,272 901.8
The following table shows year wise Interest Bearing Loans and investments sanctioned / approved by the Corporation since its inspection to the year 1981.
INVESTMENTS SANCTIONED/APPROVED BY HBFC
Years No. of Cases Amount (Rs. in million).
Since inception to 30th
June, 1973. 23,688 421.3
1973-1974 Normal 5,441 141.7
Flood 46,985 99.5
1974-1975 10,985 289.2
1975-1976 Normal 12,395 413.3
Flood 25,424 48.8
1976-1977 Normal 9,406 340.2
Flood 1, 73,946 301.5
1977-1978 10,302 416.4
1978-1979 Normal 13,693 664.4
Flood 19,270 42.8
1979-1980 Normal 14,736 808.2
Profit Flood 3,243 5.0
Sharing.
1980-1981 Normal 17,902 1,058.1
Profit Flood 3,251 10.7
Sharing.
Grand total 3,90,667 5,061.1
Under the partnership scheme the Corporation has during the past two years, approved 39,239 investments amounting to Rs. 1882.0 million. The Corporation has, all along, supported the small house builders and, therefore, over 80 percent of the loans made by the Corporation so far are for amount up to Rs.20,000/-. These loans even under the interest bearing scheme carried a preferential low rate of interest at 9 percent while higher loans were charged interest at 11-12 percent. The lending rates compared very favourably with the then prevailing normal commercial rate of interest.
HOUSE BUILDING FINANCE CORPORATION
RECOVERY UNDER HBFC MANUAL
General:-
First of all at the time of delivery of final cheque, the partner is informed about the Account number, monthly installment to be paid and the date of start of repayment of his investment. This information is usually contained in the final cheque receipt to be signed by the partner and one copy is handed over to the partner. The bank memo book duly embossed with the number of the partner’s account is also delivered to the partner along with copy of cheque delivery receipt.
An informatory letter called advice is also issued about one month before start of repayment.
In case a borrower/partner makes default and the case is referred to the recovery staff. First of all before initiating recovery action he should be well versed and well equipped with the following:-
1. Availability of all required data i-e up-to-date default list full and correct particulars of the investment/loan and property.
2. Availability of required stationary i-e file covers, white sheets, ball pens etc.
3. Opening of recovery file.
4. Calculation of default.
5. Calculation of balance.
DIFFERENT ACTIONS TO BE TAKEN UNDER HBFC
MANUAL FOR RECOVERY OF CORPORATION DUES.
Notice R-I.
In case of default the partner is reminded in form R-I , to be signed by Distt. Manager/Manager (Recovery)/Supdt., (Sub Manager) and its time is 15 days.
Reminder to R-I
In case of no response a reminder is to be issued namely reminder to R-I and its time is 7 days.
R-II (Legal Notice)
If default is not yet paid, a legal notice for 15 days will be served duly signed by Distt. Manager or Manager (Recovery). This notice should be served through personal contact or Registered post.
In case the default persists, the same can be recovered through the under mentioned two legal actions:-
i) Under land revenue Act.
ii) Under Section 30 of HBFC Act.
R-III (Recovery Certificate).
The case is referred to Revenue authorities through this certificate.
Proforma (R-4)
Register to maintain record of recovery certificates.
Proforma (R-6)
All notices served through personal services are recorded in the register.
Notice (R-7).
It is decided to affect recovery of HBFC dues under section 30 of HBFC
Act a notice for 7 days is to be issued to the defaulter in format R-7. This is required under section 29 of HBFC Act.
Notice (R-8).
To file application in the District & Session Court, the proforma usedis prescribed in the manual.
Proforma (R-9).
Proforma is designed to maintain proper record of the cases being deal with and results thereof under Section 30 of HBFC Act.
After taking over possession of the property, the same will be sold through public auction. For this purpose a Govt. Auctioneer will be appointed andproper publicity will be made about the auction.
Proforma (R-10 & R-11).
Proper record of the default cases should be maintained by each Distt
Managers and monthly statement of default and recovery in various types of cases will be sent by them to their respective zones in prescribed proformas i-e R-10 and R-11.
Proforma (R-12)
The zonal office should in turn pass on the figures in a consolidated form in respect of all the Districts in proforma R-12 to Executive Director (Ops) for complication of data.
Proforma (R-13).
The Operation Division will compile the data for the information of Management in proforma R-13 on the basis of statistics received from zonal Offices.
LIST OF HOUSE BUILDING FINANCE CORPORATION
OFFICES
1. Head Office: 5th Floor, Sheikh Sultan Trust
Building, 10 Beaumont roads,
Karachi.
2. Zonal Office, Karachi 4th Floor, Central Hotel Building Mere weather Road, Civil Lines,
Karachi.
3. Regional Office, Karachi Ground Floor, Sheikh Sultan Trust
Building, 10 Beaumont roads,
Karachi.
4. Regional Office, Quetta: shop no. 1-26/7, opp. perfection
house, m.a jinnah road,
quetta.
5. Regional Office, Hyderabad: 295-B, Block-E, unit-9 Latifabad,
Hyderabad.
a) District Office, Hyderabad: as above.
b) District Office, Nawabshah. B-350, Behind firdos hotel,
Kutchery Road,
Nawabshah.
c) District Office, Thatta Major Ali Zaheer Building,Ist floor,
Muhallah shah kamal ,
Thatta.
d) District Office, Sanghar: 951- chaudhary corner,
Near main bus stop,
Sanghar.
e) District Office, Mirpur Khas: Tourabad, Behind shah waliulluh,
high school,
Mirpur Khas.
6. Regional Office, sukkur: Noor house, Near Ghazi Abdul
Rasheed park, Market road,
Sukkur.
a) District Office, khairpur : 18, court road ,
Khairpur .
b) District Office, Dadu: 44/7 Ist floor ,Ahmed Manzil,
college road,
Dadu.
c) District Office, Larkana: shop no 24-25 Kennedy market,
Larkana.
7. Zonal Office, Lahore: lake road, near chuburji,
Lahore.
8. Regional Office, Lahore as above.
a) District Office, Kasur: khan market, doserra ground ,
kasur.
9. Regional Office, Faisalabad 81-a people colony ,
Faisalabad.
a) District Office, Jhang: Near tehsil office, Kutwali road,
Jhang.
b) District Office, sargoda Kutchery bazar ,
sargoda.
10. Regional Office, Gujranwala: 27-A,satellite town,
Gujranwala.
a) District Office, sialkot: near tahsil office,
sialkot.
b) District Office, sheikhupura: 2-civil lines, Lahore sargoda road,
sheikhupura.
11. Regional Office, multan chungi no. 9 near khana
Frung-e-Iran,
Multan.
a)District Office, Muzaffargarh: near standard bank( Habib bank )ltd.
Multan road ,
Muzaffargarh.
b)District Office, DeraGhazi khan: house no.69/70 block no.13,
sadar bazaar road,
DeraGhazi khan.
c) District Office, sahiwal: 75-A Block –F Freed town ,
sahiwal.
d) District Office, vehari: 45-block 2,peoples colony ,
vehari.
12. Regional Office, Bahawalpur: Al-haque ,opp.commisioner house ,
Bahawalpur.
a) District Office, Bahawalnagar: khanabad road, tesneem fawara
chowk,
Bahawalnagar.
b) District Office, Rahim yar khan: 35-Bano Bazar ,
Rahim yar khan.
13. Regional Office, Islamabad: banglow no. 10, street no 10,
A-f.8/3,
Islamabad.
a) District Office, gilgit: hbfc District Office,
giligit.
14. District Office, rawalpindi 776/f satellite town ,
rawalpindi.
a) District Office, attock : 10-pleaders line,
attock.
B) District Office, Gujrat : Civil line ,
Gujrat .
c) District Office, Jehlum: B-1/566 islamia high school,
Jehlum.
15. Regional Office, Peshawar: 36-denfence officers colony,
Peshawar.
a) District Office, dera ismail khan: Haq nawaz shahid park,
dera ismail khan.
B) District Office, mardan . Afgan market judge bazaar ,
mardan.
c) District Office, kohat: Gulu bears jungle khel ,
Peshawar road,
Kohat.
16. Regional Office, ,abbottabad: ist floor, lupply bazaar ,
Manshra .
17. District Office, Manshra: Manshra.
a) District Office:
Mirpur Azad Kashmir : Kashmir Development co-operative,
Bank Building,
New Mirpur Azad Kashmir.
b) District Office, Muzaffarabad: Azad Kashmir.
