Govt’s housing finance scheme will only support limited segment, experts say

KARACHI: Banking and real estate experts believe the government’s subsidized mark-up housing finance scheme will benefit only a limited segment in rural areas. They have urged the government and banking regulators to enhance the financing amount to minimize the shortfall of housing in the country and attract investment from the private sector.

They said that the coverage of financing from banks should be fixed in line with the current value of housing units and the cost of construction in different cities in order to attract citizens to take advantage of the scheme.

The State Bank of Pakistan (SBP) recently rolled out ‘Mera Ghar - Mera Ashiana, markup subsidy and risk sharing scheme for affordable housing finance’ allowing commercial banks to provide financing of up to Rs2 million at a markup rate of 5% and between Rs2 million to Rs3.5 million at a markup rate of 8%.

Under the scheme, a house of up to 5 marla or an apartment of up to 1,360 sq. ft. area can be purchased.

Earlier, the government had allocated an amount of Rs 5 billion as subsidy on markup for this scheme in the budget for the current financial year 2025-26.

Talking to Business Recorder, builder and developer Hanif Gohar said the initiative taken by the federal government to tackle the rising housing deficit of the country is laudable as the deficit surged to over 12 million, according to estimated data revealed by local builders and developers endorsed by the World Bank (WB).

However he said that the government should enhance the subsidy and financing amount to give benefits at a large scale, particularly to middle-class families.

He said the subsidy on markup for this scheme must be enhanced to Rs50 billion instead of Rs5 billion which is “peanuts”, and the range of Rs3.5 million should be raised to Rs5 million.

“Mind you, we as builders and developers can construct a small flat or a small house carrying 80-square-yard in far-flung areas like the northern bypass, Karachi or other areas with the amount of Rs3.5 million,” he said.

Meanwhile Ibrahim Amin, an engineering and project valuation expert, said the scheme will certainly provide support to individuals and families who have already saved up money to buy a house.

However, since property prices are higher in major cities, the government should enhance the financing limit from banks to make it feasible for middle and salaried class citizens living in urban areas, said Ibrahim, who is also chairman of TriStar International, an engineering & project valuation firm.