The federal government has decided to extend the markup subsidy period from 10 to 15 years due to the higher debt burden ratio (DBR) and low socio-economic ranking of the Tier category applicants under Naya Pakistan Housing and Development Authority (NAPHDA) projects.
Sources told ProPakistani that the federal cabinet, on the summary of the Cabinet Division, approved to extend markup subsidy period from 10 to 15 years with reduced customer pricing such as 2 percent per annum during the first five years and 4 percent per annum during five to 10 years and 5 percent per annum during 10 to 15 years.
The commercial banks/PFIs have recently done the appraisal of the existing Government Markup Subsidy Scheme (G-MSS) and found that the bankability of the applications belonging to the Tier-1 NAPHDA projects is not viable mainly due to the higher debt burden ratio and low social-economic ranking of the applications.
Therefore, the applications are unable to qualify for the required amount of loans so, in order to address the situation, NAPHDA has suggested extending mark up subsidy period from existing 10 to 15 years with reduced customer pricing such as 2 percent per annum during the first five years and 4 percent per annum during five to 10 years and 5 percent per annum during 10 to 15 years.
It is pertinent to note that the government under the Kamyab Pakistan Program already approved the increase in the markup subsidy period, from the existing 10 years to the 15 years, the Tier-1 of the G-MSS with a reduced customer pricing of 2 percent during the first five years, 4 percent during the second five years, and 5 percent during the third five years period.
Recently, the SECP has recommended the inclusion of the Housing Finance Companies (HFCs) in the ambit of the G-MSS for all Tiers, on the same terms and conditions, like those for the commercial banks/FIs/HBFC in order to enhance coverage and outreach of housing Finance Facility.
Sources said that the SECP, being a regulator, will decide the eligibility criteria and to assess the financial soundness of the HFCs, the HFCs may be included, once the proper mechanism for risk mitigation, underwriting, legal review, and post monitoring is established and a robust system of reporting and portfolio monitoring to the developed which will be reviewed and confirmed by the SECP.
Sources said that the commercial banks received loan applications worth Rs. 258.6 billion under the existing G-MSS as of 8 December 2021, Against those applications, loans to the tune of Rs. 104.6 billion have been approved, and Rs. 29.8 billion has been disbursed to the borrowers.
It is worth mentioning here that the maximum size of a loan is Rs. 2.700 million under Tier-1 of the G-MSS, in which loan tenor is a minimum of 5 and a maximum of 20 years, whereas mark up subsidy for 10 years (with customer pricing) is 3 percent for the first five years and 5 percent for next five years and market rates are applicable for the loan tenor exceeding 10 years.