The Presidents/ Chief Executives

All Banks/DFI

Dear Sir(s)/Madam(s),

Markup Subsidy for Housing Finance

1. Housing plays an important role in economic development by contributing in GDP growth, employment generation and social wellbeing. Further, more than 40 industries and 70 percent of unskilled labor are linked with housing and construction sector.
2. In order to provide formal financial services at affordable rates, Government of Pakistan is providing Markup Subsidy for Housing Finance. The key features of the facility approved by the Government are given below:

Particulars	Markup Subsidy Program
Eligibility Criteria	All men/women holding CNIC First time home owner One individual can have subsidized house loan facility under this scheme only once Only for construction and first purchase of newly constructed affordable housing units
Size of Housing Unit	Size of the loan is segregated into three tiers, as under: Tier 1 (T1) - Housing Units/apartments of up to 125 square yards (upto 5 Marla) with covered area of up to 850 square feet. (NAPHDA) Tier 2 (T2) - Housing Units/apartments of up to 125 square yards (5 Marla) with covered area of up to 850 square feet. Tier 3 (T3) - Housing Units of more than 125 square yards up to 250 square yards (10 Marla) or apartments with covered area from more than 850 square feet to 1,100 square feet.
Maximum Price of Housing Units	Maximum Price (Market Value) of a single housing unit at the time of approval of financing, as under: Tier 1 (T1) - Rs 3.5 million Tier 2 (T2) - Rs 3.5 million Tier 3 (T3) - Rs. 6.0 million
Maximum Loan size	Maximum size of the loan of a single housing unit, as under: Tier 1 (T1) - Rs 2.7 million Tier 2 (T2) - Rs 3.0 million Tier 3 (T3) - Rs. 5.0 million
Loan type	Long term housing finance loans
Loan Tenor	10/15/20 years, depending upon choice of customers.
Security Requirements	As per banks’ credit policy and prudential regulations for housing finance, the housing unit financed will be mortgaged in favor of financing bank.
Allocation in Budget	Finance Division shall give authority to SBP to debit GOP account on quarterly basis for the subsidy payment to banks. Payment will be made to the banks on submission of quarterly-consolidated subsidy statement as per format prescribed by State Bank of Pakistan.
Pricing	Pricing for Housing Loans: Loan Tiers Customer Pricing Bank Pricing Tier 1 KIBOR+250 BPS Tier 2 5% for first 5 years & 7% for next 5 years KIBOR+400 BPS (Spread may vary) Tier 3 7% for first 5 years & 9% for next 5 years For loan tenors exceeding 10 years, market rate will be applicable for the period exceeding 10 years.
Executing Agency	All commercial banks including Islamic banks and House Building Finance Company Limited (HBFCL)
Application Form	A standardized Application Form both in English and Urdu will require minimum essential information with simple format. The processing time will not exceed 30 days after submission of all documents by the borrower and the same will be clearly stated in the application form.
Standardized Procedures	Banks to have standardized loan documents and risk acceptance criteria.
Monitoring	SBP will publish consolidated information about the loans extended under this program for information of the public on quarterly basis on its website.
Geographical distribution	Whole of Pakistan.

3. Banks can also avail risk coverage against the housing finance under the scheme from Pakistan Mortgage Refinance Company (PMRC) at mutually agreeable terms and conditions.
4. The banks are advised to ensure successful implementation of this facility through dissemination of necessary instructions to branches/ regions and capacity building of field staff, development/alignment of financing products and marketing campaigns, etc.
5. Please acknowledge the receipt.