SBP: State Bank of Plotistan

Unless SBP shares granular data proving otherwise, it's guaranteed that Roshan Apna Ghar will lead to speculative investments, making it harder for resident Pakistanis to afford a home.

If you are receiving it over email, you may want to click on the title above to read it on the website as Google may have clipped it.


Below is an excerpt from GoP’s press release on Sep 27th1

With reference to misleading claim being circulated on social media, a spokesman of Ministry of Information and Broadcasting stated that there will be absolutely no change whatsoever in the original words and the original musical composition of the national anthem of Pakistan. The rumors spread are completely baseless and fabricated in this regard.

Based on the aggressive focus on real estate of the PM, the President, and the highest-profile real estate marketing agent SBP Governor Reza Baqir, the rumor was that the first line of the anthem was being changed to the following

Pak Sar Zameen Dot Com

Kishwar e Haseen Shaad Baad

Yes, yes, it doesn’t rhyme, but when has there been a rhyme and reason to various policies implemented in the land of pure. I wish I had come up with the above, but I didn’t. I read it on Twitter and can’t find the tweet now to give due credit.


SBP Governor: The real estate broker

SBP is promoting is real estate investment and speculation, as he himself says that the purchaser who bought the house through the Roshan Digital Account Apna Ghar scheme can withdraw and repatriate the money without any hurdles. This shows that the scheme isn’t targeted towards those overseas Pakistanis who want to build or buy a house to live in it.


What tweeps have to say about it.


Badly designed GoP policy

Real Estate is a complex market. Announced schemes do not result in the expected results if the incentives aren’t designed well. The much-touted longest-running money laundering scheme of PTI also known as construction amnesty resulted in the following as per Business Recorder. Every line of these two paragraphs is damning of how this government’s amnesty scheme turned out.

Housing finance - Editorials - Business Recorder (brecorder.com)

This government ran into this problem after the PM had made tall claims about the Naya Pakistan Housing Authority and all that, and did make some advances in terms of developing foreclosure laws that banks could work with, even brought the Real Estate Regulatory Authority Act, and went as far as forcing commercial banks to lend to housing. But things have only barely changed for the lower-, especially lowest-income groups. Plus, it’s brought two problems that threaten to make the situation downright untenable in not too distant future. The rush to develop housing led to the smart idea about the amnesty scheme that lured black money into construction and real estate with no questions asked. That’s when everybody in government first learned about the 40 or so sectors associated with real estate and wouldn’t stop harping about it. But the amnesty opened the floodgates of suspect money into everything associated with these sectors. And the problem with artificially stimulated demand is that it leads to textbook rise in prices, especially when so much money comes so quickly.

So prices duly went through the roof and made housing even more unaffordable for people with less money, and no black money at all who got completely left out of the bonanza. Also, despite arm-twisting the banking sector to lend to the less fortunate, no money has yet reached the very bottom of the food chain because the poor lot that dwells there does not even have the luxury of bank accounts. At the end of the day the rich, who were forced to hide their money abroad, grew richer and real estate and construction got priced out of the reach of most common men. And the dream of the Naya Pakistan Housing Authority, etc., is fast becoming a nightmare of ordinary people who now face higher rents as well because of the way prices have been driven up.


Badly Designed SBP Policy

Dawn wrote a report summarizing Tabadlab’s paper that SBP’s construction industry incentives will not lead to an increase in low-cost housing. SBP issued the following rebuttal

SBP’s clarifies DAWN’s article “SBP package to benefit influential builders only” Apropos the DAWN story titled “SBP package to benefit influential builders only” published on 11th September 2021, it should be noted that the contents of the story are factually incorrect and misleading. It is clarified that SBP guidelines issued on September 02, 2021 for housing finance in under construction projects do not provide any “package” or “incentive”. Further, it is clarified:

  1. The SBP guidelines in no way benefit “influential builders only”. Actually, these are designed to promote housing and construction finance for all categories of projects including affordable and low cost housing. The objective of these guidelines is to facilitate both potential home owners and builders who are currently unable to access bank finance for under construction projects. Under these guidelines, financing will also be available for small projects of two to three apartments with area as small as 5 Marla or less.

  2. The objective of the SBP guidelines issued is not to micro manage the banks. On the contrary, these guidelines, prepared after detailed consultations with banks, provide an enabling framework that will help banksto venture into this new segment of financing. It is entirely up to the banks to decide which project and builder are credit worthy in accordance with their internal credit policies and due diligence.

Focus on the bold part. SBP is trying to deflect that there is financing available for low-cost housing. Yet this is the same as the PTI saying that its money-laundering scheme has incentives for low-cost housing. Yet let me quote again from another BR editorial

Low-cost housing - Editorials - Business Recorder (brecorder.com)

The construction boom is visible as the market is flooded with developers and new projects. Land prices are booming, and the perception is that the construction amnesty scheme has been captured by the elite. The activities in land trading are fuelled by speculation. Although policy incentives have encouraged banks to focus on house finance, the affordability for the middle class is simply missing. The other problem is the lack of low-cost housing which was supposed to be the focus of PTI government's housing policy.

….The mistake the government seems to have made under the pressure of builders and developers was giving supply-side taxation and regulatory incentives for all forms of housing. The tax is fixed in per square-feet and is ridiculously low for high-end projects.


SBP’s shady statistics

The editorial goes on to state two interesting things:

One,

Another interesting aspect is that only around 40 percent of approved loans have supply of houses.

Thus, when SBP shares its charts of housing finance approved, it is not that this amount will actually be disbursed. Let me explain this. See the video below at 6:30 mark. The vlogger says that he requested a mortgage amount in Tier 2 (Rs.30 lac to Rs.60 lac) but the bank only approved 50% of his requested amount. Now he has the difficult job of finding a house that he can afford with such a loan amount. Assume he had identified Rs.65 lac apartment and requested a mortgage of Rs.50 lac as he has Rs.15 lac saved. However, the bank has approved Rs.25 lac. Now he can’t buy the same flat as he will have to come up with the balance Rs.40 lac to buy that 65 lac flat. He may not have this much money lying around. So he will have to find an apartment of Rs. 40 lac (provided such apartments exist).

But finding the Rs.40 lac apartment in any project won’t solve his problem. The apartment should be in a project that the bank will approve of. For example, the banks will not finance an apartment that doesn’t have completion certificates, which many apartment buildings don’t have.

This may also mean that approved amounts may never be disbursed. Thus, when SBP shares this on its website, it is highly misleading.

Bank Lending for Affordable Housing Gains Momentum

As a result of numerous measures of State Bank of Pakistan and full support of the Government, bank lending for the Government’s flagship markup subsidy scheme, commonly known as Mera Pakistan Mera Ghar (MPMG), has picked up momentum. Since the launch of the scheme, applications of Rs 154 billion under MPMG have been received by banks and banks have approved housing finance of over Rs 59 billion up till August 31, 2021.

The impression is that there is Rs.59 billion ready to be disbursed, but as we know now, that will not be the case.

Two,

This is what BR editorial has to say

SBP has all the data from banks and can make a dashboard to show how much loans are being approved in a certain city or area within a city.

SBP does not share raw data and reports misleading statistics to show that results are being achieved. I have covered this many times and most recently in the below piece

SBP watch (and other hot takes)
SSSS: a Subtweet, a suspect Statistic, SBP governor and a Shopping mall.
The Subtweet Over WhatsApp, quite a few people forwarded me this subtweet where Khurram is posting SBP’s comments on my post. SBP and its statistics Let's talk about the third tweet, where SBP says that banks generally accelerate their efforts towards the end of June and December. That is true. As corporate bankers, we always pushed the borrowers to fully…
Read more

Mortgage Data / Dashboard needed

If SBP really wants to show that its policies are having the desired effect, it should provide anonymized data and if it can’t provide that, at least a detailed dashboard of the following:

  1. How many mortgages have been approved in various tiers?

  1. How many of the loans have been disbursed in various tiers?

  2. What is the price of houses that are being purchased under this product?

  3. What is the down payment in these houses?

  4. Where are these houses located?

  5. What is the type of houses (completed flats, houses or under construction) that are being mortgaged?

Providing the aforementioned data in an anonymized manner isn’t too hard. SBP already has it. It will take an Excel savvy analyst at SBP around 1 hour or a maximum of one day to anonymize the data and release it for analysis.

But SBP will not do it.

Thus, we are left with SBP and the SBP governor getting praises for releasing charts and aggregate data that can’t be sliced and diced for analysis.

As I showed in my earlier post, SBP was showing already built hotel refinancing of Rs. 13.2 billion as new construction financing

Based on my “channel checks”, this Rs.13.2 billion refinancing of existing loans has been reported as construction financing by commercial banks.

Thus, when SBP claimed that the 97% target was achieved in June 2021, it was counting a transaction that is not construction financing as construction financing.


How to make the most of it?

Based on the details available now, one can repatriate the cash realized on sales of real estate property purchased through Roshan Apna Ghar.

If you are in US, UK or Canada where you can borrow against equity in your house at cheap rates, I suggest you take out the maximum loan. Say the interest rate is 2%. Remit all the money in Roshan Digital Account and purchase USD Naya Pakistan Certificates (NPCs) that pay around 6.5% p.a. You make a net profit of 4.5% on your dollars.

Now get the bank to mark a lien on these NPCs and borrow 100% in rupees against it and buy a completed property in a good project. Rent out this property for some passive income or keep it vacant. Sell the property in a few years when its price appreciates. Pay the principal back to the bank and repatriate all the profit. Even if the rupee depreciates, you don’t have to worry, as your cash is in dollar NPCs. The profit that you made on the sale gravy.

This will lead to a further increase in prices of the built housing unit as well as land, making it harder for resident Pakistanis to afford a home. But then, who cares about resident Pakistanis? SBP, at least, doesn’t.


Real Estate as a money-laundering hub

We covered earlier that how real estate has become a hub of money laundering, with plot files acting as bearer instruments.

Are plot files the new prize bonds?

“There are many housing societies and market players who are trading open files worth Rs1 million to Rs10m through open certificates and affidavits in the open market and remain totally outside the regulated regime,” said a senior government official.

Such operations were initially going on between property dealers and their clients, who traded open files, but now well-known housing societies and developers had also adopted this business model, the official said.

The result is that a plot, property or asset is originally registered in the name of one individual but is transferred to another one without paying revenue to the government. Such transactions take place in the internal system of the society/developer who charges membership fees, transfer fees, sports fund, security charges and so on while allowing the transaction but without formally going into the government set-up or revenue mechanism.

In some cases, the developers and societies also use open files and certificates because they do not actually own the land they are marketing. Therefore, they tend not to formally issue allotment letters and help facilitate exchange of undeclared money or sometimes even black money.

Interestingly, the government has stopped issuing prize bonds of large denominations (like Rs40,000) to meet the requirements of FATF, but some well-known societies are openly issuing affidavits or certificates of Rs1m to Rs10m.

It appears that housing societies are in on this game, as they are making money on attesting the affidavits and promoting them as bearer instruments.

“These papers (affidavits) are like currency notes and belong to the bearers,” said the official, adding the societies even charge a fee of Rs10,000 to Rs20,000 to confirm that the affidavit was “genuinely” issued.


Resident Pakistanis: Children of a lesser god.

The below section is excerpted from my earlier post about mission creep and micromanagement of SBP.

SBP: State Bank of (overseas) Pakistanis

The revised Prudential Regulations do not apply to cars financed by overseas Pakistanis through the Roshan Apni Car account. I had missed a trick, a week ago, by not including Roshan Apni Car in the below tweet.

For the benefits continued to be lavished on overseas Pakistanis by SBP for remitting dollars to Pakistan, SBP should be renamed.

SBP has even negotiated a priority delivery with car dealers and manufacturers for the overseas Pakistanis [while resident Pakistanis have to pay “own” to get timely delivery of their vehicles].


Elite Capture of SBP construction and housing policies

A few examples of what SBP policies have resulted in so far. These are all elite projects.

TPL

Eighteen

Out of the Rs.7.5 billion, Rs.3 billion is refinancing of existing loan. Thus, this isn’t a new project that is being launched due to SBP’s policies.

Grove Residency

Apartments in Grove Residency now cost Rs. 4 crore.

DHA City

DHA was the first institution to make use of the Roshan Digital Account fleecing overseas Pakistanis by 50% when selling plots to them


Unless SBP releases granular data that is verifiable, do not buy the manjan that r̶e̶a̶l̶ ̶e̶s̶t̶a̶t̶e̶ ̶a̶g̶e̶n̶t̶ SBP Governor sells.


Footnotes

Please do not take any advice from this account and refer to your investment advisor or tax consultant.

1

PRESS INFORMATION DEPARTMENT

GOVERNMENT OF PAKISTAN

ISLAMABAD

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R No. 264

PRESS RELEASE

THERE WILL BE NO CHANGE IN ORIGINAL WORDS AND MUSICAL COMPOSITION OF NATIONAL ANTHEM: SPOKESMAN OF I&B

Islamabad: September 27, 2021

With reference to misleading claim being circulated on social media, a spokesman of Ministry of Information and Broadcasting stated that there will be absolutely no change whatsoever in the original words and the original musical composition of the national anthem of Pakistan. The rumors spread are completely baseless and fabricated in this regard.

The national anthem will be re-recorded using the most advanced recording technology and with a larger number of vocalists.

The Steering Committee has unanimously resolved to ensure highest international standards of orchestration and vocal rendering for the official re-recording of the National Anthem, which was originally first recorded in 1954.

The Committee resolved to assemble a large choir of about 120 to 150 gifted vocalists from all 4 provinces, Gilgit-Baltistan as well as Azad Jammu and Kashmir to make the new official recording truly representative and participative of the whole federation including religious faiths.

This was decided in the 4th meeting of the Steering Committee on the re-recording of the National Anthem, presided over by the Committee's Chairman, former Senator and federal minister Javed Jabbar, members include reputed musicologists Arshad Mahmud, Rohail Hayat and Nafees Ahmed, Director Productions, ISPR Brigadier Imran Naqvi, film sector leader Satish Anand, Secretary, Ministry of Information and Broadcasting, Ms Shahera Shahid, Director, General, Directorate of Electronic Media and Publications, Ms. Imrana Wazir and prominent persons associated with creative arts and education from the four provinces, held at the Arts Council of Pakistan Karachi on Saturday, September 25, 2021.

The first recording, which remained the only official recording was conducted in 1954. Over the past 67 years, there had been revolutionary changes to recording voices and music to provide optimal clarity and tonal accuracy while using digital technology.

Reviewing the distinctive quality of brass bands in the Pakistan Army, Air Force and Navy, it was also decided to make all efforts to utilize and further enhance the locally available instrumental capability of musicians while exploring the options for using the orchestras of friendly overseas countries, which have standing national orchestras to record only the instrumental version.

The vocal version would be rendered entirely by Pakistani vocalists. Despite possessing enormous talent in music, Pakistan neither has a permanent national orchestra unlike many other countries including Muslim countries like Turkey nor Pakistan possesses locally located most advanced sound recording facilities .

Expressions of interest have already been invited from film and video producers of Pakistan to provide proposals for the creation of the new video of a duration of one minute 20 seconds by featuring the new re-recorded sound version.

The Steering Committee noted the need to complete its task well in time to celebrate the 75th anniversary of the Independence of Pakistan, which would occur in 2022. Aspects of preparatory and production logistics alongwith their respective costs were also discussed in detail.

The Steering Committee was notified by the Federal government in June 2021 and later expanded to ensure maximum representation.

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