The State Bank of Pakistan (SBP) has given a new option to the banks and development finance institutions (DFIs) that can now invest in Retail Term Finance Certificates (TFCs), Sukuk, and shares to be issued by Real Estate Investment Trusts (REITs) management companies to achieve the mandatory five percent targets for housing and construction finance.
The banks and DFIs can make investments in the units/shares issued by the REITs, subject to compliance with all other applicable regulations.
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They are also allowed investments in the Sukuk/bonds issued by the Pakistan Mortgage Refinance Company (PMRC), but the investments in the PMRC’s Sukuk/bonds and the amount of refinancing availed from the PMRC will be netted off toward counting the mandatory target.
Additionally, banks and DFIs can provide financing to Microfinance Banks (MFBs) for the extension of housing finance to eligible borrowers to the extent of actual disbursements by the MFBs. Conversely, the banks extending financing to the MFBs for housing finance will have to report such transactions to the SBP separately.
However, the SBP mentioned that the exposures will be considered on an aggregate basis up to a maximum of 15 percent of mandatory targets for the housing and construction finance of a bank/DFI on a given date.
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The SBP has already directed banks to gear up their infrastructure and capacity to ensure their compliance with meeting these targets. Accordingly, each bank is required to develop a concrete plan of action with detailed measures and timelines to achieve its housing and construction finance targets.
This action plan should contain a breakdown of the overall targets into quarterly targets, the development of suitable products, the launching of media campaigns, the development of internal technology, capacity building of the staff, and other actions needed to ensure that the five percent target is met.
The new window of opportunity will help banks to meet the target and provide an opportunity to developers and construction companies to raise funds.
