SBP Develops Mechanism for Payment of Markup Subsidy for Housing Finance

The State Bank of Pakistan (SBP) has developed a complete mechanism for payment of markup subsidy for housing finance.

The SBP has also sent the details of the new mechanism to banks and development finance institutions (DFIs), who are working as Executing Agencies (EAs) for the facility.

The EAs have been advised to submit their claims to the Development Finance Support Department (DFSD), SBP BSC, Karachi, within 15 working days from the end of each quarter. However, for the quarters ended December 2020 and March 2021, these institutions are allowed to submit their claims within 15 days from the issuance of the circular.

According to a statement by the central bank, the EAs will evaluate financing applications of customers as per the parameters of markup subsidy defined in the scheme for Housing Finance and as approved by the Federal Cabinet, issued by the SBP on March 25, 2021, and revised from time to time.

The scheme has been launched to promote homeownership and all EAs, including commercial banks, microfinance banks, and HBFCL, have been apprised of the necessary instructions on how to carry out the defined mechanisms.

The new scheme segregates loans into four tiers. Tier 0 (T0) is for a house up to 125 sq yds (5 Marla) or a flat or apartment with a maximum covered area of 1,250 sq ft. Under this tier, five percent markup is payable for the first five years and 7 percent for the next 5 years.

Tier 1 is for a house up to 125 sq yds (5 Marla) with a maximum covered area of 850 sq ft or a flat or apartment with a maximum covered area of 850 sq ft. The interest rates for this category are 3 percent for the first 5 years and 5 percent for the next 5 years.

Tier 2 covers a house up to 125 sq yds (5 Marla) or a flat or apartment with a maximum covered area of 1,250 sq ft. Here a customer will pay 5 percent for the first 5 years and 7 percent for the next 5 years.

Finally, Tier 3 applies to a house up to 250 sq yds (10 Marla) or a flat or apartment with a maximum covered area of 2,000 sq ft. Under this tier, a customer will pay 7 percent for the first 5 years and 9 percent for the next 5 years.

Bank pricing will be applicable for loan tenors exceeding 10 years, for the period exceeding 10 years, the SBP informed.



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