Banks’ Exposure Limit for Housing and Construction Sector Up by 25%: SBP

The State Bank of Pakistan (SBP) has revised up the exposure limit of investment and financing from 15 percent to 25 percent for banks to help banking companies achieve targets for the housing and construction sector.

The banking regulator has been aggressive to promote the housing and construction sector to reduce the deficit of housing demand across the country and stir up construction activities to generate economic opportunities in different sectors.

With the increase in the exposure limit, the banking companies could generate more funds to cater to the demand of the housing and construction sector, mainly for the customers such as builders and developers, residential, and non-residential citizens.

In April 2021, to increase funding for housing and construction through capital markets and microfinance banks (MFBs), the State Bank allowed the counting of the following exposures of banks/DFIs towards the achievement of their housing and construction finance mandatory targets:

  • Direct financing to/or investments in bonds/TFCs/Sukuk issued by Real Estate Investment Trusts (REITs) Management Companies.
  • Investments in units/shares issued by Real Estate Investment Trusts (REITs), subject to compliance with all other applicable regulations.
  • Investment in Sukuk/bonds issued by Pakistan Mortgage Refinance Company (PMRC), however, investment in PMRC’s Sukuk/bonds and amount of refinancing availed from PMRC shall be netted off towards counting the mandatory target.
  •  Financing to MFBs for extending housing finance to eligible borrowers to the extent of actual disbursements by MFBs. Banks extending financing to MFBs for housing finance will have to report such transactions to SBP separately.