World Bank’s Initiative
World Bank has been developing a house financing plan for Pakistan to help deal with the housing shortage crisis. WB along with PMRC (Pakistan Mortgage Refinancing Company) are going to help in development of the mortgage sector, focusing mainly on the lower income brackets. The World Bank will be providing funds to banks through PMRC to increase the lending volume, specifically to lower income group. The target is to help expand the housing finance sector in such a way that it is profitable for the banks but also easily accessible than conventional loans. On-lending support is another way the World Bank plans to help banks increase their lending power; banks will be able to lend the money they have borrowed from other organizations/people.
United Bank Limited
United Bank Limited (UBL) is one of Pakistan’s largest banks in the private sector. The bank operates a network of over 45,000 customer touch-points which include 1,390+ branches across Pakistan and 19 branches overseas. It was declared Pakistan’s ‘Best Bank for Corporate Finance & Capital Market Development’ at the Pakistan Banking Awards 2017. The Bank’s entity ratings are AAA/A-1+. The Bank maintains its leadership in branchless banking through UBL Omni which has an agent network of over 42,100 outlets. The network also boasts 1120 ATMs and 480+ Contact Centre Agents across Pakistan. With a customer base of over 4 million, it leads the banking and financial services sector in Pakistan. Customers across the world have 24/7 access to the bank via UBL’s world class Internet Banking.
Vision
To be a world class bank dedicated to excellence, and to surpass the highest expectations of our customers and all other stakeholders
Mission
Values
UBL Home Financing – UBL Address
UBL Address empowers you to become the proud owner of a home by offering a variety of product and pricing options that are flexible yet affordable.
They offer four home loan facilities:
1. Buying a Home – UBL offers loans to consumers that wish to buy a home. With a maximum financing limit of 70% one can easily buy a house or apartment. UBL Address offers easy and affordable instalments.
2. Building a Home – For customers that want to construct their own homes, rather than buying one, UBL Address offers different packages.
3. Home Renovation – UBL offers financing of up to PKR 10 million to consumers that wish to simply redesign or renovate their existing homes.
4. Balance Transfer Facility – UBL enables customers to transfer their current home loan that they have taken from other Banks and Developmental Financial Institutions (DFIs) to UBL and save money.
Eligibility Criteria
Borrower must be a resident of Pakistan aged between 23 to 65. The borrower may either be self-employed, businessman/professional or a salaried individual. In each case, the borrower must have a minimum monthly income of PKR 50,000. The minimum loan size is PKR 1,000,000.
Application Processing Time
Loan application processing time required from the time you give in your application to the time you are finally handed over your loan amount, is around 20 days, provided all the required documents are in order.
Documents Required
UBL requires the following documents from all applicants.
Title Assurance
To check the authenticity of the property title documents, clear legal Opinion is solicited from Bank’s solicitor, pre- and post-disbursement legal requisites and charge a very minimum cost that must be borne by the applicant.
Mark-Up Rates
UBL uses floating rates while determining cost of a loan. The floating rate is subject to annual revision from the time of loan booking. Mark-up rates are calculated based on the prevailing one-year Karachi Inter-Bank Offered Rate (KIBOR) which is taken as the base rate. A margin that varies from one pricing option to another is charged over and above the base rate, the details of which are as follows:
Any change in the mark-up is linked to KIBOR hence there could be an upward or downward revision (if required) after every twelve (12) months from the date of the loan booking.
The applicable mark-up rate will be the rate prevailing at the month of booking.
Additional Charges and Penalties that a borrower may incur are listed in the table below.
Type of Penalty & Charges Amount/ Percentage
Late Fees (per instalment) PKR 1200
Appraisal Charges PKR 4,000 (Non-refundable)
Legal Charges PKR 4000 (or actual)
Life Insurance Optional
Processing Charges PKR 7500 (Non-refundable)
Prepayment penalties 8% in the first year, 5% in the second year and 3% in the third year onwards, on additional partial payment amount
Throughout the market, Property Insurance is mandatory for Home Loan Products. All other banks charge insurance fee from the customers, however with UBL Address, customers avail this free of cost.
Maturity Period
The maturity period for loans can range between 3 to 20 years depending upon the time of loan. The minimum property value must be PKR 1 million. The loan facility is only available for residential properties.
Loan to Value Ratio
The housing finance shall be provided at a maximum Loan to Value ratio of 85:15.
Prepayment Charges
Partial payments are payments over and above a customer's monthly instalment. If a customer wishes to make repayments in addition to his/her monthly instalment, we allow the customer to make it once a year.
A customer cannot divide his/her Partial Payment of 6 monthly instalments into numerous instalments. The “No Penalty” option is applicable only on his/her first partial payment of any amount between the range of PKR 50,000 and 6 monthly instalments. If a customer decides to partially payoff any amount that is more than his/her 6 monthly instalments, he/she will be charged a penalty of 8% in the first year of the loan booking date, 5% in the second year and 3% in the third year onwards, on his/her additional partial payment amount. If the customer wants to make more than one partial payment of any amount in a 12-month period then customer will be charged a penalty of 8% in the first year of the loan booking date, 5% in the second year and 3% in the third year onwards, on his/her full/ 2nd subsequent partial payment.
Rescheduling/Restructuring of Loans
Loans will not be restructured more than once within two years. Tenure of the financing may be changed by maximum two years beyond the original tenure agreed with the customer subject to maximum financing tenure of 25 years.
Provisions already held against non-performing financing, to be rescheduled/restructured, will only be reversed if condition of 10% recovery or six instalments is met.
Default
Reaching 180 days past due date will be considered as default. If the borrower defaults again within two years after restricting of loan, the financing shall be classified under the same category in which it was prior to rescheduling/restructuring.
Limitations
Currently, properties offered for mortgage must be in a targeted area in either Karachi, Lahore, Islamabad, Rawalpindi or Faisalabad. UBL Address is no available in other locations of Pakistan which is a major drawback.
Conclusion
The incredible growth of Pakistan’s real estate market is even more astounding when you realize that it was all done in cash and the country still has little or no concept of mortgage financing. If you compare this to India who now has a healthy mortgage market valued at 10 percent of their economy you can see that Pakistan is lagging greatly.
The market for home loans is picking up fast. The onus is on the government to introduce reforms and new legislation to make it easier to get a first-time home loan, and the entire process should be streamlined. Our legal system should support the industry, particularly in timely action against defaulters. The House Building Finance Corporation (HBFC) has almost become bankrupt owing to very low recovery of disbursed loans. Such matters greatly hamper growth of the industry and must be countered immediately.