Box 3.2:
Major Initiatives in the Draft Policy for Low-Cost Housing Finance

State Bank of Pakistan has recently formulated a draft of “Policy for Promotion of Low Cost Finance of Housing” and disseminated the same on its website on July 18, 2018 for soliciting public comments. The major highlights of the policy are as follows.

Definition of low cost housing financing in Pakistan to be adopted as loan amount of up-to Rs 2 million with the property valuing up to Rs 2.5 million. The maximum monthly income of a low cost housing finance borrower should be up to Rs 60,000.

  • SBP to introduce a subsidized financing facility for low cost housing by providing liquidity to the financial institutions at subsidized rate. SBP will provide refinance up to Rs 1 million or 50 percent of loan amount at a rate of 1 percent to banks/DFIs and the end borrower rate will be 5 percent. The remaining 50 percent of the loan / financing amount shall be provided by the banks/DFIs from their own sources at fixed rate of up to 12percent or variable rate of 1 year KIBOR plus risk premium up to 4 percent. The facility will be provided for both individual house borrowers and housing builders/developers. Similar financing facility will also be provided through the Islamic Financial Institutions.

  • Banks to be assigned housing finance targets with instructions to make these targets part of the overall business plan and departmental targets.

  • The general reserve requirements against low cost housing finance portfolio of banks/DFIs to be waived.

  • Bank/DFI’s exposure in low cost housing to be exempted from the exposure limit of 10 percent for real estate sector.

  • Microfinance banks to be allowed to increase housing finance amount up to Rs 1 million from Rs 500,000.

  • A standardized loan application form is to be issued through PBA to streamline loan processing by banks/DFIs.

The World Bank, 2017, Pakistan Development Update: A Shared Responsibility.

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