Last month, the SBP quietly and without much fanfare launched the Shahbaz-government backed affordable housing mark-up scheme somewhat unoriginally titled the Mera Ghar Mera Ashiana. The program appears to be an iteration of the previous Mera Pakistan Mera Ghar scheme introduced under the Naya Pakistan Housing Program (NPHP).
But don’t get lost in the names: while the two share many similarities, they also differ in profound ways. There are, however, several mistakes from the earlier scheme that the SBP would do well not to repeat (read: “Don’t forget the bells and whistles,” Aug 7, 2025). Discussing that is not the agenda for this piece. The focus here is to assess how successful, or if at all, the new scheme could be in its current form.
Although the SBP has not yet articulated specific goals for the program, it can be reasonably assumed that it targets low- and middle-income households. That assumption will serve as the benchmark for evaluating its effectiveness.
To start with, the new scheme is much simpler. First time home owners can seek a loan for the purchase or construction of a plot, house or apartment not bigger than 5 Marla or 1360 sq ft.
The loan to value can be up to 90 percent, with a loan tenor of 20 years with subsidy for the first ten. Loans will be granted across two tiers. Tier 1 will charge an interest rate of 5 percent for a loan size of Rs2 million and Tier 2 at 8 percent for loans that range between Rs2 and 3.5 million (for reference, the previous scheme was much more comprehensive with cheaper loans, financing up to 10 million and specific projects that were to be developed under the now defunct housing development authority).
Restricting eligibility to first-time homeowners ensures that the subsidy goes to people genuinely in need of housing rather than investors or those with multiple properties. Secondly, while technically, loan seekers can purchase property at virtually any price point ensuring that their own equity does not fall below 10 percent, themodest housing size limit ensures the scheme remains within the affordable segment, preventing subsidy leakage to luxury housing.
Additionally, the low fixed mark-up of 5% and 8% enables predictability of monthly payments, the high LTV ratio ensures accessibility of the scheme to households that lack large upfront capital and the longer tenor spreads out the financial burden. These are all supportive of affordable housing. Meanwhile, the 10 percent first loss coverage reduces the banks’ perceived risk in lending to low-income earners.
On the other hand, there are gaps that will ensure a limited success rate for this scheme, given that we don’t know yet what the scheme tangibly hopes to achieve. For one, the scheme is a one size fit all for all regions, urban and rural alike. There are wide regional variations in land prices across Pakistani towns and cities. In expensive urban areas, a 5 Marla plot or 1360 sq. ft. flat may not be “affordable”, even with the subsidy and the home owner may have to pitch in significantly to the equity portion of the loan. That limits affordability.
The subsidy duration of 10 years leaves home owners to either take out limited loans with a 10-year tenor or be willing to pay a much higher instalment when the subsidy period lapses. This does not only lead to repayment stress; it also discourages banks to extend loans to informal workers or the lower-end of the income quintiles fearing defaults. This brings us to the other side of the equation: the supply side.
After the abrupt halt of the Mera Pakistan Mera Ghar scheme, it remains unclear whether banks and formal financial institutions are institutionally ready to extend long-term risky mortgages. Last time there were conversations around building mechanisms to assess credit worthiness of households with alternative or informal incomes, but substantial change in that area is not visible.
At the same time, the scheme focuses on financing demand from the consumers but does not adequately address supply constraints, such as land availability, construction costs, and developer incentives for affordable units, the latter of which the Mera Pakistan Mera Ghar scheme did do, albeit with little success.But it would be remiss not to mention that without a parallel housing supply program, demand-side subsidies actually risk pushing prices up. Additionally, new housing stock if it even leads to that would grow dependent on where builders and developers’ interests lie.
Ultimately, the scheme is limited in its scope, perhaps designed to give the mortgage market and affordable housing a slight nudge rather a kick.
Without any lofty goals (or no goals at all?) the policymakers have shielded themselves from any criticism post-program. But that also leaves the scheme uninspired, with the SBP coming across patently uninterested.
Placing so much faith in banking sector’s willingness to lend with a low risk-sharing mechanism, focusing only on the demand side and leaving supply to fend for itself, and not clearly outreaching low-income, informal households that arguably hold the majority of the housing deficit, the scheme will struggle. For now, it feels less like a fresh start and more like a cautious recycling of an old idea, stripped of its branding and ambition. Whether that’s a virtue or a flaw is up for debate. What matters is whether it brings lower and middle income Pakistanis closer to owning a home.