Circulars/Notifications / Infrastructure, Housing & SME Finance Department  

 IH&SMEFD Circular No. 03 of 2017
April 18, 2017

The Presidents/Chief Executives
All Banks/DFIs

Dear Sir/Madam,

Revised Prudential Regulations for Housing Finance

This refers to IH&SMEFD Circular No. 03 dated May 06, 2014 on the above subject.

2. With the aim to further facilitate the promotion of Housing Finance, Prudential Regulations (PRs) for Housing Finance have been revised in consultation with the stakeholders. Accordingly, certain amendments have been made in the PRs which are as under:

  1. Regulation HF-1(4): Development of Financing Documents: In addition to existing requirements, banks/DFIs are further advised to obtain the thumb impression(s) along with the borrower's signature(s) on financing and recourse documents. The banks/DFIs are also encouraged to provide terms and conditions in Urdu language for better understanding of the customers and read out the same to the customers before finalizing the documentation process.

  2. Regulation HF-1(08): Information Disclosure: For the purpose of calculating the Annualized Percentage Rate, the number of days in a year has been changed to 365 days from 360 days. Accordingly, the changed formula is as under:

    Mark-up for the period X 365 X  

    Average Outstanding Principal Amount during the period No. of Days  

  3. Regulation HF-1(11): Facilities to Related Persons: For the purpose of bringing clarity in the said regulation, amendment has been made that in case of resignation/separation/termination, staff housing finance should be monitored and serviced as commercial housing finance.

  4. Regulation HF-2: Types of Housing Finance: The said PR has been amended to the extent that the borrower can avail additional housing finance after the completion of two (02) years instead of three (03) years from the last date of disbursement. Moreover, the time to avail Balance Transfer Facility (BTF) in housing finance has also been reduced to eighteen (18) months from three (03) years.

  5. Regulation HF-3: Debt Burden Ratio: In case of clubbing of income of the co-borrower, the consent of co-borrower should be obtained in writing.

  6. Regulation HF-7: Property Assessment: The restriction to determine the frequency of property revaluation has been lifted. Further, the housing finance upto Rs. 10 million should be subject to assessment of the property by at least one valuator listed on PBA approved panel and the housing finance above Rs. 10 million should be subject to assessment of the property by at least two valuators listed on PBA approved panel.

    However, the properties valuing upto Rs. 3.0 million should not be subject to assessment by valuator. Banks/DFIs can use their internal resources to assess the properties having market value upto Rs. 3.0 million.

3. These changes are applicable with immediate effect.

4. All other instructions on the subject shall remain unchanged.

5. 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 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 will tantamount to violations of PRs and shall be dealt with accordingly.

6. Please acknowledge the receipt.

Revised Prudential Regulations for Housing Finance

Yours faithfully,

(Syed Basit Aly)


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