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KARACHI: The State Bank of Pakistan (SBP) has revised the consumer pricing (markup rates) for the Tier-1 of the federal government’s mark-up subsidy scheme for housing finance.

In order to support the housing and construction sector, the federal government had initiated a markup subsidy scheme to provide concessional housing finance facilities to the masses thereby promoting home ownership. In view of the feedback received from various stakeholders, Government of Pakistan (GoP) has decided to revise pricing (mark-up rates and subsidy payment period) under Tier 1 of Mark-up Subsidy Scheme for Housing Finance which is used to finance housing units in Naya Pakistan Housing and Development Authority (NPHDA) projects.

Previously, under tier one, the customer price for housing loans was 3 percent for the first five years. Now this pricing has reduced to 2 percent for the one-year to 5-year. As per fresh directives, customer pricing for housing loans has been fixed at 4 percent for the next five-year (6 to 10 years) compared to previous price of 5 percent. In addition, a new slab has been introduced and customer pricing for housing loans for 11-year to 15-year will be 5 percent. However, housing finance loans exceeding 15-year, market, ie, banking pricing will be applicable for the period above 15-year. Bank pricing for the Tier one housing loans will be KIBOR + 250 basis points for all tenures.

The SBP has asked all banks, Microfinance Banks and DFIs that revision in the government’s Mark-up Subsidy Scheme for Housing Finance will be applicable with immediate effect. However, other features of the Scheme will remain unchanged.

Housing finance: SBP ups banks’ mandatory target

Following the directives of the federal government, the State bank has taken a number of steps to support the housing and finance sector by providing subsidized loans. Housing and construction financing by banks posted an unprecedented growth of 85 percent during calendar year 2021 (CY21) supported by the government of Pakistan special markup subsidy scheme “Mera Pakistan Mera Ghar.”

Overall, banks’ outstanding credit for housing and construction increased by Rs163 billion, from Rs192 billion in CY20 to Rs 355 billion at the end of CY21. In addition, recently, the SBP has announced an increase in the mandatory target for financing of housing and construction of buildings from 5 percent to 7 percent of their domestic private sector credit. With a view to promoting housing and construction of buildings in Pakistan, the State Bank, in July 2020, decided to advise mandatory targets to banks and accordingly, each bank was asked to ensure that the financing for housing and construction of buildings (Residential and Non-Residential) shall be at least 5 percent of their domestic private sector credit by December, 2021.

However, in January, the SBP on Friday advised banks to increase financing for housing and construction of buildings (Residential and Non-Residential) to at least 7 percent of their respective domestic private sector advances by December 2022.

Copyright Business Recorder, 2022

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