Housing
plays an important role in real economic development of
the country by contributing in GDP growth, employment
generation and social well being. Further, more than 40
industries and 70 percent of unskilled labour are linked
with construction of housing units. One of the major reasons
for huge shortfall of housing units in Pakistan is lack
of access to formal financial housing products.
2.
To cater the financing needs of individuals, Consumer
Finance Prudential Regulations (PRs) were issued vide
BPD Circular No. 35 dated October 28, 2003. Housing finance
along with credit cards, auto loans and consumer durables
finance was addressed in Consumer Finance PRs. However,
over the period of time, it has been observed that nature
of housing finance in terms of pricing, tenure, collateral,
and repossession etc. is distinct from other consumer
finance products.
3.
Accordingly, apart from other measures, SBP has prepared
separate PRs for Housing Finance to encourage banks to
follow housing finance more rigorously and prudently,
which are applicable with immediate effect for the fresh
financing facilities. However, since the banks/DFIs need
to segregate their existing housing finance portfolio
according to these regulations, banks/DFIs are allowed
an implementation period of six months from the date of
issuance of subject PRs. Further, Housing Finance Regulations
in Consumer Finance PRs, especially Regulations R-15 to
R-22 stand amended/deleted.
4.
It is worth-mentioning here that providing enabling Regulatory
Framework is one important step only; however, visible
improvement in house financing shall only occur when banks/DFIs
re-position themselves strategically in the market by
appropriately aligning their business strategies with
the needs of the sector. We expect that with the introduction
of separate Prudential Regulations for Housing Finance,
the banks/DFIs will be able to adopt viable housing finance
approaches that will ultimately lead to better service
and provision of housing finance to individuals. It is
expected that banks/DFIs would make separate set-ups for
dealing with housing finance.
5.
The new set of Prudential Regulations for Housing Finance
has been placed at SBP web-site http://www.sbp.org.pk which may be accessed/ downloaded for consultation and
ease of reference at any time.
6.
These Prudential Regulations do not supersede directives
and instructions issued by the State Bank of Pakistan
in respect of areas not covered under above regulations,
which also include the instructions on penalties.
7.
The benefit of Forced Sale Value (FSV) of eligible collaterals/
securities held against Non Performing Loans (NPLs) from
the date of classification for calculating provisioning
requirement shall now be available for 3 years as against
5 years allowed vide BSD Circular No. 1 dated October
21, 2011.
8.
Banks/ DFIs are advised to ensure circulation of these
regulations among all their offices/ branches for meticulous
compliance in letter and spirit. Non-compliance of these
PRs will lead to punitive action under the relevant provisions
of Law. It may be noted that the transactions structured
in a manner to circumvent these PRs shall be viewed seriously
and shall be dealt with accordingly.
Please
acknowledge the receipt of circular.
Encl:
As above