Islamabad: Pakistan’s central bank has directed the commercial banks to speed up low-cost housing finance to facilitate a large number of home loan applicants.
The applications under the government’s flagship Mera Pakistan Mera Ghar (MPMG) affordable housing initiative have crossed Rs 200 billion in the last 10 months. The banks have approved financing of Rs78 billion out of which Rs18 billion have already been disbursed as of mid-October 2021.
Governor State Bank of Pakistan (SBP) Dr Reza Baqir has asked the commercial banks to “accelerate the pace of approvals by banks to match the requests for financing to ensure that people are not discouraged by the processing time.” He expressed hope that joint efforts of all stakeholders will ensure “the dream of Pakistanis to have their own homes can become a reality.”
Dr Baqir also appreciated the progress made by the banking industry in supporting low-cost housing finance for first-time homeowners under MPMG.
He recalled that low-cost housing finance was almost non-existent in Pakistan until last year as commercial banks rarely ventured into this area fearing its inherent risks. However, the strong commitment of the government especially SBP, commercial banks, Naya Pakistan Housing and Development Authority (NAPHDA) and other stakeholders is resulting in a “considerable increase in finance for housing and construction” in the country.
SBP has launched an enabling regulatory environment due to which the housing and construction credit of banks has reached Rs305 billion at the end of September 2021 as compared to Rs166 billion same time last year, reporting year-on-year growth of 84 per cent.
SBP in collaboration with other stakeholders has launched a number of initiatives including simplified loan application, standard facility offer letter, development of standard risk assessment criteria for builders and developers, development of income proxy model and streamlined financing documents.
A dedicated website has also been launched to facilitate home loan applicants. It covers all information including eligibility criteria, tenor of the loan, maximum amount of loan, markup rates to be charged, maximum list of documents required and subsidy being provided by the government.