State Bank of Pakistan (SBP) released data stating that the incumbent government’s flagship markup subsidy scheme, commonly known as Mera Pakistan Mera Ghar (MPMG), has picked up momentum.
State Bank in its statement said that since the launch of the scheme, applications of Rs154 billion have been received under the scheme, and among this, the banks had approved housing finance of up to Rs59 billion by the end of August 2021.
Bank financing under government’s affordable housing scheme Mera Pakistan Mera Ghar is gaining momentum. Till 31Aug21 banks have approved loans worth Rs59bn and already disbursed Rs11.5bn. Disbursements increased by Rs3.8bn or 49% during Aug21. See PR: https://t.co/YC4GA6ZDjE
— SBP (@StateBank_Pak) September 8, 2021
The statement said that pace of disbursement under the MPMG scheme has also picked up, which was slow in the beginning due to different factors including the availability of housing units.
For the month of August, the disbursement under the scheme reached Rs11.49 billion, up from Rs7.71 billion in the month of August, showing an increase of 49 per cent month-on-month.
Central Bank also provided details of the banks that have approved the loans, showing that the Meezan Bank is on the top, with loans worth Rs9.53 billion approved by the bank, followed closely by Standard Chartered Bank, with Rs9.49 billion worth of loans approved. Lagging behind is Habib Bank Limited in the third position with Rs5.08 billion worth of loans approved.
On the other hand, if we look at the top three disbursers of finances, the top position is taken by Bank Alfalah, with Rs1.31 billion disbursed. It is worth mentioning that Bank Alfalah is in the fourth position with respect to loan approvals as well.
The second in disbursement is Meezan Bank, with Rs1.22 billion disbursed, followed by the National Bank of Pakistan with loans worth Rs1.15 billion disbursed. Standard Chartered has disbursed Rs1.13 billion, followed by BankIslami, with loans worth Rs0.78 billion disbursed among applicants.
The statement read, “On average, to date banks have approved 38 percent of amount applied and 19 percent of the approved amount has been disbursed.” It added that the acceptance rate has increased over the past few months as the lending banks have put the needed upfront investment in procedures and the technology has been set up to process the applications for the scheme.
SBP notes that the banks disbursed amounts in different stages of construction or purchase, thus the pace of disbursement is dependent upon the speed of construction and completion of the purchasing process.
What it means for the masses
Managing Director KASB Securities A A H Soomro took to Twitter to comment on the data. He said, “Mera Pakistan Mera Ghar scheme is one of the best projects launched by the government.”
He added, “With borrowers able to borrow at the cheaper single interest rates for the first 5 and 10 years – similar to rental yields – housing has actually become within reach. Notwithstanding the rising construction costs. Connectivity via public transport will connect suburbs to the downtown.”
Mr. Soomro said that one of the advantages of buying via a financial institution like banks is that the risk of being defrauded is mitigated as the banks do their due diligence on the property.
One advantage of buying via financial is that banks do do their due diligence on the legality of the property. The chances of fraud are nearly non existent. Banks are being incentivised and covered by the government to lend. SBP has given the targets as well. Thus the rush.
— A A H Soomro (@AAHSoomro) September 8, 2021
Talking about the shortcomings faced in this scheme he said that the masses will reap real benefits of the MPMG scheme when the land will have ‘clean documentation’ and is ‘cheaper’. Similarly, he said that the majority of Pakistan’s economy is cash-based, and the people are unable to give bank statements, a requirement under this scheme.
Lastly, he said, that while the ‘innovative means’ of credit scoring (of the cash earning Pakistani majority) are awaited, lenders may continue to shy away from lending to people in the informal sector unless there is a credible way of loss recovery.
He said, however, that this is a step in the right direction, and “housing is on the uptick”.
While the "innovative means" of credit scoring are awaited, lenders may continue to shy away from lending to people in informal sector unless there is a credible way of loss recovery. That said, the needle has moved & housing is on the uptick. Land prices need to be monitored.
— A A H Soomro (@AAHSoomro) September 8, 2021