Banks’ lending for house building surged by 30% YoY in June

July 27, 2021 (MLN): Amid low interest rates and economic recovery, Banks’ lending to the Private sector surged by 10% YoY and 3% MoM to Rs6.82trillion in June’21, latest data issued by SBP showed.

As per the data, sectors that notably increased their borrowing from banks included construction and allied industries such as cement and steel, manufacturing, power generation, transmission and distribution sector, and telecommunication.

During the period, the construction sector borrowed Rs106.6bn up by 57% YoY, manufacturing sector borrowed Rs3.55tn (up by 8% YoY), whereas power generation, transmission, and distribution sector and telecommunication borrowed Rs549.9bn and Rs164.72bn, marking a growth of 14% and 15% YoY respectively.

Under the manufacturing segment, borrowing from pharmaceutical manufacturers, textiles manufacturers, software manufacturers, manufacturers of food products, fertilizer and pesticides manufacturers, tyres and tubes manufacturers, refrigerators and motorcycles manufacturers, and automobile parts makers registered growth during the period under review.

Moreover, banks’ credit for personal use surged by 31% in June to Rs885.8bn. The major portion of this lending is attributed to consumer financing which surged by 33% YoY to Rs707.92bn. Under consumer financing, banks’ loans for house building reached a record high of Rs103.63bn, up by 30% YoY and 6% MoM, mainly fueled by SBP’s measures to promote housing and construction of buildings in the country.

To recall, the government recognized the housing and construction sector as the potential driver of growth of the domestic economy and set out detailed plans to support the sector and revive the economy. The government announced an amnesty scheme for developers that they would not be asked about the source of funds for housing projects. In addition, it also reduced taxes on the purchase and construction of houses by low and middle-income groups. 

Loans for the purchase of cars mounted to Rs308bn in June, up by 4% MoM and 46% since June 2020. The increase in Auto financing was mainly due to lower interest rates and increasing prices of passenger cars, affecting consumers’ ability to buy on cash. Personal loans also increased by 22% YoY and 2% MoM to Rs235bn as rising commodity prices and the impact of Covid-19 have dented consumers’ real income.

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