ISLAMABAD: The World Bank has approved the restructuring of the USD 190.24 million Pakistan Housing Finance Project (PHFP), expanding the scope of its flagship risk-sharing facility and revising key performance targets to reflect changing market conditions following the suspension of the government’s subsidised housing finance programme.
According to official documents, the restructuring aims to revitalise low- and middle-income housing finance by capitalising on improving market conditions and declining interest rates.
Approved in March 2018, the project was designed to enhance access to housing finance and support capital market development through the operationalisation of the Pakistan Mortgage Refinance Company (PMRC).
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The initiative sought to address longstanding structural weaknesses in Pakistan’s housing finance sector, where mortgage lending has historically accounted for only 0.25 percent of GDP.
The World Bank noted that overall implementation progress and achievement of the project’s development objectives remain satisfactory, with the PMRC capital-strengthening component rated “highly satisfactory.”
Since becoming operational, PMRC has played a significant role in expanding housing finance by promoting fixed-rate mortgages, extending loan tenors by an average of five years and reducing borrowing costs by three to four percentage points.
The project has also helped mobilise private sector funding. The PMRC leveraged World Bank-supported subordinated debt to raise an additional USD 69.4 million from domestic capital markets, while the International Finance Corporation (IFC) invested USD 3.1 million as an equity partner in 2020.
In addition, the project facilitated the emergence of private housing finance companies and enabled microfinance institutions to enter the housing lending market. A pilot Risk Sharing Facility (RSF) established under the project has already been leveraged tenfold, providing coverage for a mortgage portfolio valued at USD 100 million.
The restructuring comes after the government’s “Mera Pakistan Mera Ghar” (MPMG) programme — which offered concessional fixed-rate mortgages to low-income households — was suspended in 2022. The suspension, coupled with macroeconomic instability and sharply rising interest rates, significantly slowed mortgage origination during 2022-24.
To address these challenges, the World Bank has approved the expansion of the scaled-up RSF to cover all categories of low- and middle-income housing finance, rather than limiting support to loans originated under government-backed schemes. The facility will also support financing under the newly announced “Mera Ghar-Mera Ashiana” housing initiative.
The Bank observed that the RSF’s existing capital base remains underutilised, with the portfolio currently under coverage roughly equal to its capitalisation. It said broadening eligibility would help accelerate mortgage lending at a time when falling interest rates are reviving demand for housing finance.
The restructuring also revises several end-of-project targets. The target for the number of mortgages refinanced by PMRC has been reduced to 25,000 by June 2026, while the target portfolio under RSF coverage has been set at approximately USD 182 million.
The World Bank said the revisions were necessary due to the suspension of MPMG, the cancellation of nearly USD 30 million in planned additional RSF capitalisation, and the macroeconomic crisis that followed shortly after approval of additional financing in 2022.
Despite these setbacks, the Bank maintained that the project continues to generate significant developmental impact and remains central to efforts aimed at deepening Pakistan’s housing finance market and expanding access to affordable home ownership.
Copyright Business Recorder, 2026