1. Mortgage Finance Opportunities and Challenges By Taimur Afzal, Chairman ASSOCIATION OF MORTGAGE BANKERS (AMB) March 25th 20131

2. Obama’s State of Union Address 2013 March 25th 20132

3. Pakistan Population Population (2011) 187 Million World's sixth most-populous country Population Growth Rate 1.6 % Urban population35% Second most urbanized nation in South Asia Population below age of 25 Years 100 Million Major Cities ◦ Karachi 21M Lahore 11 M RWP 3.5 M Faisalabad 3M ◦ Hyderabad 3M Multan 2.6 M GRW 2.5 M Peshawar 3.6 M ◦ Quetta 2M March 25th 20133

4. Pakistan Economy GDP Rs. 20,600 Billion GDP Growth Rate 3.67% Employment by Sector Industry13.7% Construction 7% Agriculture 45% Un-Employment rate 6% Inflation Rate 11 % (2012) March 25th 20134

5. Pakistan Banking Assets (Rs. in Billion) SegmentAdvancesNPLs Infection Ratio Corporate Sector 2,760 419 15.2 SMEs Sector 276 95 34.6 Agriculture Sector 203 29 14.5 Consumer sector 250 43 17.5 Commodity financing 512 6 1.1 Staff Loans 84 2 1.9 Others 108 12 10.8 Total 4,196 607 14.5 Mortgage Financing Portfolio 53 B NPLs 17 B Inf. Ratio 31.4% Mortgage Financing Portfolio 53 B NPLs 17 B Inf. Ratio 31.4% March 25th 2013 5

6. Mortgage as %age of GDP  GDP Pakistan= Rs. 20,600 Billion  Mortgage portfolio= Rs. 53 Billion  Staff House Finance= Rs. 77 Billion  Mortgage = 0.7 % of GDP  International Comparables March 25th 20136

7. Potential of Housing Sector Housing Shortfall World Bank Estimation 8 million housing units (2009) Annual incremental demand 600,000 units. Annual housing needs 1.1 million Units (600,000 incremental demand and 500,000 units from the backlog) Total Funding requirement Rs. 3.3 trillion per year (average price of Rs. 3 million per unit) Funding DemandRs.330 billion (Assuming only 10% housing needs as effective demand) Mortgage Financing Requirement Rs. 231 billion per annum (At 70% LTV) March 25th 20137

8. Success Story March 25th 20138

9. INDIA – Growth of Mortgage  Mortgage to GDP ratio 20129% 2002 2%  Mortgages comprise the largest component in banks’ retail portfolio  Mortgages have grown from 1.5% of banks’ advances to 10% over the last 10 years  Projections 2020 Outstanding mortgages will increase 8 fold from Rs. 5 trillion currently to Rs. 40 trillion by 2020 Mortgage to GDP ratio projected at 20% by 2020 March 25th 20139

10. Growth Drivers in India Growth driven by ◦ Economic growth ◦ Rising disposable income ◦ Affordable interest rates ◦ Increased urbanization ◦ Favorable demographics ◦ Housing as a priority sector March 25th 201310

11. Growth Drivers in India National Housing Bank ◦ Housing regulatory framework ◦ Refinancing ◦ Focus on low to mid income segment ◦ NHB Residex Foreclosure laws ◦ SARFAESI ◦ Reduced NPA Securitization ◦ Mortgage registry March 25th 201311

12. Growth Drivers in India Mortgage Guarantee/ Insurance Tax incentives Specialized Housing Finance Companies Focused provisioning March 25th 201312

13. Solution March 25th 201313

14. What can be done ? Macro Factors ◦ Economic growth ◦ infrastructure ◦ Affordable interest rates ◦ Real estate prices Funding sources ◦ Channelization of long term funds ◦ Securitization ◦ Refinancing ◦ Mortgage insurance/ guarantee March 25th 201314

15. What can be done ? Legal framework ◦ Foreclosure ◦ Stamp /registration fees ◦ Title documents Regulatory issues ◦ Mortgage specific regulations ◦ Provisioning issues ◦ Credit rationing March 25th 201315

16. What can be done ? Product development ◦ Target market diversity ◦ Tier 2 cities ◦ Developer-buyer financing model ◦ Focused product  Public sector employees  Private sector employees  Rural customers March 25th 201316

17. Year GDP (Rs. In Billion) Mortgage Portfolio (Rs. In Billion) Mortgage as %age of GDP 2012 20,600 530.26% 2015 23,000 4602.00% 2020 28,000 1,1204.00% 2025 33,000 1,9806.00% 2030 38,000 3,80010.00% Vision 2030 March 25th 201317

18. Thank you March 25th 201318