Circulars/Notifications / Infrastructure, Housing & SME Finance Department  

 IH&SMEFD Circular No. 04 of 2019
March 11, 2019

The Presidents/ Chief Executives,
All Banks/DFIs


Exemptions/Relaxations in Prudential Regulations for Low Cost Housing Finance

Dear Sir/Madam,

           In order to promote low cost housing finance in the country, it has been decided to define the low cost housing as part of SBP’s regulatory framework and allow certain regulatory relaxations for banks/DFIs. To qualify under low-cost housing finance, the borrower has to fulfill the following criteria:

• Maximum value of the housing unit/apartment up to PKR 3 million
• Covered area of the housing unit / apartment up to 850 square feet in urban areas
• Loan size up to PKR 2.7 million

2.  To further encourage and facilitate the Banks/DFIs to pursue low-cost housing finance, regulatory exemptions/relaxations in the following Prudential Regulations (PRs) for housing finance are being advised:

i. Regulation HF 4: Loan to Value Ratio (LTV): LTV ratio of upto 90:10 shall be maintained for low cost housing finance.

ii. Regulation HF 5: Limit on Exposure against Real Estate Sector: Financing extended to low cost housing, shall be exempted from exposure limit of 10 percent on real estate sector.

iii. Regulation HF-7: Property Assessment: For the purpose of financing low cost housing units, banks/DFIs are allowed to apply the valuation of single unit on all the units of the same society/colony instead of conducting separate valuation for each unit constructed on the same layout and size.

iv. Regulation HF 9: General Reserve against Housing Finance:
Banks/DFIs are exempted from general reserve requirement against the financing extended to low cost housing.

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

4. Banks/DFIs are advised to ensure circulation of these exemptions/relaxations in the regulations for housing finance among all their offices/branches for meticulous compliance in letter and spirit.



Yours sincerely,


(Ghulam Muhammad)


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