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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.
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