Subsidy meant for housing sector: Existing or already constructed structures excluded

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has reportedly excluded existing or already constructed structures from the subsidy meant for housing sector, well-informed sources told Business Recorder.

Sharing details, sources said, Naya Pakistan Housing & Development Authority (NAPHDA) stated that a summary on the markup subsidy for housing finance on July 21, 2020, was submitted for consideration of the ECC which in its meeting held on July 22, 2020 decided the following: (i) financing plan/model of mortgage finance for loan tenor up to 20 years; (ii) plan for markup subsidy for ten years @ five percent for first five years and seven percent for next five years for housing units measuring up to five Marla and @ seven percent for the first five years and nine percent for the next five years for housing units measuring 10 Marla; (iii) on expiry of 10-year subsidy period, the beneficiaries will be required to pay markup at the prevailing market rates; and (iv)

approval of allocation of Rs23.621 billion for the loan tenor of 10 years with a supplementary grant of Rs4.667 billion on account of markup payment during the current financial year.

It was suggested that Finance Division may authorize State Bank of Pakistan to debit GoP account on a quarterly basis for payment to the participating banks to provide comfort to them for continuing the payment of subsidies for the period of 10 years and to facilitate their participation in the housing scheme. The NAPHDA would finalize the financial modalities in consultation with Finance Division. NAPHDA further stated that during preparation of the summary, an error occurred in formulating the proposal which requires partial review and approval of the [revised] proposal by ECC as follows i.e. approval of allocation of Rs.33.095 billion for the loan tenor of 20 years, with a provision of Rs.4.774 billion on account of markup payment during the current financial year (2020-2021).

The draft summary for ECC was circulated to Finance Division and State Bank of Pakistan (SBP) for consultation under Rule-8 of the Rules of Business 1973. Finance conveyed their concurrence to proposal. State Bank of Pakistan had also supported an amendment to the proposal. However, in order to bring clarity, SBP suggested the proposed amendment as under: "approval of allocation of Rs.33.095 billion on account of 10 years markup subsidy on loans with tenor up to 20 years with a supplementary grant of Rs.4.774 billion on account of markup payment during the current financial year [FY 2020-21]." In response to a query by the Secretary, Finance Division, the discussion also prevailed on the point whether the subsidy should be utilized only for new constructions or it could include existing/already constructed structures as well? After deliberations, the house reached the consensus that the subsidy was meant only for new constructions.

Copyright Business Recorder, 2020