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Good prospects seen for Sri Lanka home mortgage market

ECONOMYNEXT – Low interest rates in Sri Lanka have the potential to activate the home mortgage market into which a large pool of savings can be channelled, a senior analyst at a stock brokerage said.

In Sri Lanka housing finance is only about seven percent of total loanable assets with much of it backed by pension fund balances, said Murtaza Jafferjee, Managing Director of JB Securities.

In most countries the home mortgage market has a much higher share, he told an investment fund and asset management forum held by Fitch Ratings.

In the United States it is about 40 percent of total loanable assets and in countries like Thailand and the Philippines it is about 20 percent.

“So if you ask me where will this capital appetite really come from, this is the big one which has not taken off in sri lanka – that we don’t really have a mortgage market,” Jafferjee said.

Single digit interest rates would make it more likely the mortgage market would get activated, he said.

Sri Lanka has about five million households and an organised home building market can create a huge appetite for capital, he added.

“Everybody has a house but over 50 percent have a substandard house,” Jafferjee said. “That is where people like the funds can create bond funds. That has to activate. That is the big one to go.  That is perhaps where most of these savings can go.”
 (Colombo/September 24 2015)

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