Govt to Launch Loan Options for Home Buyers

The government has finalized 14 major facilities to be provided to the housing projects to ensure access to finance including the establishment of an Apex Housing Finance Institution.

This has been agreed during the last meeting of the Working Group on “Access to Finance” under the Chairmanship of Hafiz Mian M. Nauman (Ex-MPA Punjab), Convener at Naya Pakistan Housing Development Authority (NAPHDA).

Following are the major recommendations of the Working Group on “Access to Finance” to give access to finance for the housing sector:

1. Reduction of Policy Rate (single digit) and also operating cost of banks;
2. fixed-term loans for different periods like 5, 10, and 20 years
3. re-introduce markup subsidy for low-cost and affordable housing;
4. introduction of Mortgage Bonds for easy access to finance;
5. establishment of an Apex Housing Finance Institution;
6. expand the role of Micro Finance Institutions (MFIs);
7. strengthening of Foreclosure laws regarding enforcement mechanisms like eviction from property on default;
8. end User Financing Model for Apartment Projects;
9. banks keep 10% of their respective private sector credit available for the housing and construction industry;
10. develop a risk management framework to mitigate risks associated with mortgage financing (Insurance etc.);
11. strengthening of PMRC through budgetary support and enhanced collaboration with banks & financial institutions for subsidized credit facility
12. awareness Campaign and Financial Literacy Program to educate consumers;
13. development of innovative mortgage financing products to cater to all income groups like incremental Housing Microfinance; community-based Housing Projects (Pool Resources, local NGO groups), subsidized Rental Housing; Takaful-based Housing Insurance products, help to buy equity loans (First time home buyers), fixed for life mortgages (Fixed Rate), Green Mortgages, buy to let Mortgages (Individuals with properties for rental income), offset Mortgages (Mortgages linked to saving Accounts), collaborate with Real Estate Developers to offer mortgage financing options for consumers/allottees, develop Digital Mortgage Platforms with blockchain-based solutions for secure and transparent mortgage financing, encourage Fintech companies to develop innovative mortgage financing solutions and strengthening the HR capacity of financial institutions in mortgage financing.

According to sources, Dr. Faisal Shafaat the representative of the State Bank of Pakistan gave a detailed briefing regarding their regulatory framework in the form of prudential regulations.

He explained that the capital adequacy ratio enhanced to 35 percent and the banking sector was able to disburse Rs. 233 billion in mortgage financing. He also informed about the microfinance policy of SBP in connection with access to finance for the low-income group, whereby for Mera Pakistan Mera Ghar Scheme (MPMG), Rs. 93 billion was disbursed.

He highlighted several execution and subsidy issues in view of the IMF Policy. The Chair propounded for relaxation in the policy rates (KIBOR) policy to facilitate easy and fast-track access to finance for the development of the housing sector.