Unlocking affordable housing finance for unbanked sector in Pakistan

Reall’s new partner, Trellis Housing Finance Limited, provides a ground-breaking solution that unlocks housing finance for the informally employed and unbanked in Pakistan.

Trellis and Reall Partnership Signing Ceremony. [Jamshed H. Meherhomji, Co-Founder of Trellis Housing Finance Limited; Emma Ahmed, Programme Manager, Reall.]

According to the State Bank of Pakistan, there are fewer than 60,000 mortgages in a country of 220 million people.[1] Mortgages that do exist cater only to high income groups, and housing finance at an affordable rate is scarce. Currently 46% of people in Pakistan do not have a bank account.[2]

In 2018 the Government of Pakistan established the Pakistan Mortgage Refinance Company to inject liquidity into the market, and the Naya Pakistan Housing Policy, which aims to construct five million affordable homes.

But as long as people cannot access the finance needed to purchase their homes, good quality affordable housing will never be seen as a viable and profitable market by developers.

Trellis is an independent low-cost mortgage provider in Pakistan that delivers housing finance to the informally employed.

Incorporated in Karachi in October 2020, Trellis is a non-banking housing finance company. They provide fixed-rate mortgages to low-income homeowners who do not have a registered bank account. In just over a year, Trellis has processed a substantial number of housing finance loans, with numbers growing rapidly.[3] Trellis raised an investment round in November 2021, marking a huge level of confidence by both local and international investors in their model.

Trellis also aims to give every Pakistani household access to green affordable housing. They have already piloted collaborating with housing suppliers to incorporate solar panels and water filtration as key elements in their financial products, to boost demand for climate smart, sustainable housing, which will be rolled out into a broader product offering in 2022. Guaranteed discounts are offered on all mortgages that put title-ownership into women’s names.

Now Trellis is looking to scale up through new pioneering methods:

• Utilising innovative technology for affordable mortgages. Trellis employs a digital credit assessment tool, created with support from Reall’s network of partners, that uses experts-based-algorithms and alternative data points to measure the creditworthiness of informally employed customers. Housing loans can be offered at lower interest rates because there is greater confidence in the borrower. While many industries have undergone digital transformation initiatives, the mortgage industry – in general globally – is still largely reliant on inefficient and cumbersome processes and tasks that have been in use for decades. The company’s software is uniquely configured to automate customer workflows and improve execution – from initial inquiry to the closing and disbursement process.
• “Mortgage as a service”: unlocking new capital. Some of Pakistan’s leading financial institutions have partnered with Trellis to process mortgages applications on their behalf. This arrangement is the first of its kind in Pakistan. Trellis’ processes allow banks to access low-income customers they wouldn’t normally reach, while Trellis can begin to address the demand for affordable housing without needing to raise their own capital.
• Enabling policy change. Being one of the first Housing Finance Companies to be approved and licensed, Trellis drove the effort to unlock government-subsidised interest rates for housing finance companies that were previously only provided to commercial banks. They play an active role in engaging in and contributing to policy development in this area and are always vocal about the need to collaborate and willing to mediate forums at an institutional level across various financial and public institutions to deal with common challenges.

Reall has partnered with Trellis to meet the critically low provision of mortgage finance in Pakistan.

Trellis is the first housing finance organisation to become an official Reall partner. Together Reall and Trellis will work to improve the financial viability of the affordable housing market in Pakistan. Trellis will play a crucial role in Reall’s Pakistan partner network.

• Supporting Trellis to scale up. Reall will provide Trellis with technical assistance, funding and access to a global network. In turn, this will attract other developers and investors into the market. Trellis will work closely with Reall’s housing delivery partners in Pakistan, to develop and provide mortgages for their customers.
• Delivering finance for Reall’s network of build partners. Trellis is already working with Reall partners, Ansaar Management Company (AMC), and Entertainment Pakistan Limited (EPL) in Lahore and other parts of Punjab, allowing Trellis to expand their operations throughout Pakistan.
• Boosting demand for climate smart homes. Trellis will work with Reall partner, ModulusTech, to demonstrate the potential of valuing green materials and construction methods in financial agreements.
• Demonstrating affordable housing finance through data. Trellis and Reall aim to collect mortgage and data analytics on the bottom 40th percentile of income earners, showing their ability to repay and building confidence in the market.

[1] Reall, Market Shaping Indicators: Pakistan (2021): https://reall.net/msi/pakistan/

[2] World Bank, Global Findex Database, (2017)

[3] Tech in Asia, ˜Fatima Gobi Backs Pakistan Housing Fintech Firm (2021): https://www.techinasia.com/pakistan-housing-fintech-firm-raises-funding