MORTGAGE HOUSE FINANCING

LIST OF NOTIFICATIONS REPRODUCED IN THE <!--[if gte mso 9]> MORTGAGE HOUSE FINANCING (Proposals and Prospects) By Saalim Salam Ansari, Advocate, Karachi The house mortgage financing requires vital change(s) and/or improvements in Pakistan as far as rate of mark-up based on system(s) of rental sharing(s) and quantum of monthly instalment(s) length of payments as well as Government duties/stamps and documentation(s) is concerned. I would like to emphasise on the following point(s) and/or suggest long term house financing of 20 to 30 years, low rate of mark-up on house financing, 0% excise duty on cement and other allied industries and other steps. Methods of calculation of equalizer based on rental sharing should be clear and/or simplified. The profit in mortgage financing should be based on "diminishing Partnership." In this regard the principle(s) laid down in PLD 2000 SC 760 in the respective case of (House Building Finance Corporation v. Rana Muhammad Sharif and others) shall be followed. Quantum of monthly instalment is also very vital issue. The present quantum is not practical and not within the reach of a common man, the present mortgage house financing(s) is for "haves" and/or not for "haves not". It is for the "privilege class" and not designed for every class, and every locality or area specially for the low income people and/or middle class, the designed monthly instalments are not within their reach. The period of payments of mortgage financing should be increased, the long term mortgage financing shall be encouraged, it should be for the period of 20 to 30 year(s) and/or based on not more than 7% mark-up rate for the purpose of calculation of rental sharing. The long term mortgage financing arrangement will lead the quantum of instalments to the extent of and/or equal to monthly rent supposed to be given by the borrower(s), for example a person living in a Flat, paying Rs.6,000 only per month rent. If the instalments of mortgage financing of about 30 years and he obtained a Flat for PKR One Million and paid 10% down payment, the remaining of Rs.900,000 only, the principal will be spread on 30 years and the borrower(s) is supposed to pay an instalment of Rs.6,000 only per month, the attraction in such type of mortgage financing will be developed, the Government/semi-Government and corporate employee(s), who are getting about 40% housing allowance(s) can enjoy the mortgage financing and right of ownership. The 40% house financing will be a guaranteed amount of payment(s). The enjoyment of benefit of ownership, increase of price of property in the period of financing and decrease in the principal amount of mortgage financing will be an additional charm to avail the mortgage finance. In Pakistan there is need of (7) seven millions houses in rural areas and (13) thirteen millions houses are required in urban areas. If mortgage financing will be provided to (5) five millions(s) house(s) in 3 to 5 year(s), the construction industry will take a boom cement and about 40 allied industries will be strengthened and/or will be alive. More than 10 to 15 million(s) people will get employments directly and/or indirectly, if 100% or 75% excise duty will be waived on cement and other allied industries the cost of housing will be reduced to 15% to 25%. The 75% or 100% waiver in excise duty will hamper other things also, the roads containing the material of cement and/or cement based roads will be built up instead of present traditional material. This factor also boosts the cement and/or allied 40 industries. To face the challenges of 2005 and/or WTO, these steps are necessary. The duties/stamps/registration fee(s) should be abolished in respect of registration and/or creation of mortgage deed(s), relinquished deed(s) etc. Further, the monthly instalments should be treated "expenses" and/or "tax exempted". Moreso the mortgage house should be exempted from property tax. The interest rate for the mortgage financing will not be more than 7% per annum and the entire excise duty on the cement may be waived and if the excise duty on the cement industries will be zero, the cost of the construction of houses and the residential units will be decreased 25%. Due to the lower rate and long term housing financing, if 20 Millions houses will be built up in 10 years, there will be a boom in the industrial sector, specifically cement and allied 40 industries will be revived and it can produce employment for 15 Millions people. The requirement of 20 Millions Residential units can also be achieved but for this purpose there should be a population control plan, that the increase in the population growth should not exceed 1% per annum instead of 2.7% per annum of present population growth, otherwise the whole housing scheme will not fulfil it's purpose(s) and there will be a shortage of houses and residential units. It is also proposed that funds and grants granted by the International donor agencies to build up the roads from fields or farms to market, will be utilized and these roads, highways, motor ways can be built up through cements instead of present traditional method due to "zero" rate of excise rate duty on cement. The roads made by cement will be cheaper than the roads made through the present traditional material in a long term and broader prospects. Further the roads made by cement will be more durable and useful due to the weather and/or climate condition of our country and/or will have water resistance also. The monthly instalments should be secured by way of tendering of post-dated cheques by the borrowers, which established the default in payments of instalments as civil liability as well as it is also a criminal offence under section 20 of subsections (4), (5) and (6) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and/or under section 489-F, P.P.C., the laws which also required modification(s) and/or improvement(s). The issues of leasing and consumer financing that to increase GDP and industrial development(s), the promotion of leasing and/or consumer financing is also required, further the leasing as well as consumer financing will enhance the standard of living of the common people.