ISLAMABAD – State Bank of Pakistan (SBP) has designed a policy to enhancethe loan size of the banking industry, specifically for housing finance,from Rs. 83 billion to Rs.250 billion by end of 2021.
The policy aims to increase number of borrowers of housing finance fromexisting 68,000 to 200,000 by 2021, which will play a pivotal role to meetthe need of public for purchasing houses in different cities of the country.
Under its plan, the central bank has formulated a policy on low costhousing is an attempt to resolve issues faced by the mortgage industry. Thepolicy has been formulated keeping in view international best practices andlocal market conditions.——————————
The policy constitutes of eight pillars that focus on regulatory incentivesand mechanism to address the issue of affordability of low-income borrowers.
Accordingly, the definition of low cost housing financing in Pakistan tobe adopted as loan amount of up-to Rs. 2 million with the property valuingup to Rs. 2.5 million.
The maximum monthly income of a low cost housing finance borrower should beup to Rs. 60,000.
SBP will introduce a subsidized financing facility for low cost housing byproviding liquidity to the financial institutions at subsidized rate. SBPwill provide refinance up to Rs. 1 million or 50% of loan amount at a rateof 1% to banks/DFIs and the end borrower rate will be 5%.
The remaining 50% of the loan / financing amount shall be provided by thebanks/DFIs from their own sources at fixed rate of up to 12% or variablerate of 1 year KIBOR plus risk premium up to 4%.
The facility will be provided for both individual house borrowers andhousing builders/developers. Similar financing facility will also beprovided through the Islamic Financial Institutions.
In this connection, the central bank will assign housing finance targets tobanks with the instructions to make these targets part of the overallbusiness plan and departmental targets.
SBP will facilitate provincial governments and state ownedenterprises/autonomous bodies to avail housing finance from banks.
SBP suggested tax incentives, by the Federal Government, to builders andfinancial institutions on income derived from low cost housing.