Recording an unprecedented growth of 85 percent, banks’ outstanding credit for housing and construction increased to Rs. 355 billion during 2021, showing a surge of Rs. 163 billion in a year as compared to Rs. 192 billion.
Disbursements under the Government Markup Subsidy scheme (also known as Mera Pakistan Mera Ghar (MPMG)) within the housing and construction portfolio increased by Rs. 38 billion.
Financing to Housing and Construction, and particularly under MPMG had impressive growth on the back of many enabling regulatory environments that were introduced after extensive consultations with stakeholders.
The State Bank of Pakistan (SBP) also advised the banks to increase their housing and construction finance portfolios to at least five percent of their domestic private sector advances until December 2021, introducing a set of incentives and penalties to ensure compliance.
Leading Banks for Housing and Construction Finance
Habib Bank, Meezan Bank, and Bank Al Habib were the top three contributors to the significant growth of Housing and Construction finance. Banks also made significant progress in the provision of financing under the MPMG scheme that was introduced in 2020.
Financing under MPMG picked up momentum in 2021 as approvals for financing by banks grew from near zero to Rs. 117 billion in 2021. The banks have received requests for the financing of Rs. 276 billion from potential customers, which indicates that approvals and disbursements will keep growing in the coming months.
2/2 Financing under #MeraPakistanMeraGhar scheme picked up momentum in 2021 as banks received requests of Rs276bn and approvals grew from near zero to Rs117bn in 2021. pic.twitter.com/WkE6sXkHny
— SBP (@StateBank_Pak) January 6, 2022
Bank Alfalah emerged as the leading bank with the highest disbursement of Rs. 3.3 billion followed by nine banks with disbursements of over Rs. 2 billion each. These include Meezan Bank, Bank Islami, National Bank, Standard Chartered Bank, HBFCL, United Bank, MCB Bank, Bank of Punjab, and Habib Bank.
The SBP has taken a number of steps to create an enabling regulatory environment for banks to increase the flow of financing to the housing sector. The key initiatives include allowing the acceptance of third-party guarantees during the construction period, a waiver of the Debt Burden Ratio (DBR) in the case of informal incomes, and the introduction of standard facility offer letters by the banks.
Moreover, it has advised banks to develop and deploy income estimation models for borrowers with informal sources of income.
The SBP is also conducting regular mystery shopping surveys of bank branches all over the country in addition to gauging readiness, knowledge, and the appropriate behavior of banking staff with MPMG customers. Additionally, banks have standardized and simplified loan application forms in line with the initiatives of the SBP.
