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SBP announces major changes in low-cost housing scheme

The State Bank of Pakistan on Thursday announced a relaxation in its conditions to facilitate low-cost housing.

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The government has revised its markup subsidy scheme of housing finance significantly to align with the prevailing housing market dynamics in its effort to promote low cost and affordable home ownership among low to middle-income groups, announced the State Bank of Pakistan.

The revised scheme aims to make access to housing finance easier for a large number of households who currently do not possess a house.

“With changes in the key parameters of the scheme, government of Pakistan has increased the total funding allocation to Rs36 billion on account of markup subsidy payment for financing over a period of 10 years and has assured continuity of the facility,” the State Bank of Pakistan (SBP) said in a statement.

“It is expected that revised parameters will further assist in materialising the government’s vision of providing housing to the low- and middle-income segments of the society.”

In October last year, the government started providing mark-up subsidy facility for the construction and purchase of new homes in a bid to promote housing finance to first time home buyers at subsidized and affordable markup rates.

The potential buyers have been divided into three tiers under the scheme. Now a new tier called tier-0 has been added in the scheme to facilitate participation of microfinance banks (MFBs) under the scheme for disbursement of financing of up to Rs2 million per housing unit. In view of the fact that MFBs specialise in extension of financing to low-income households, it is believed that participation of MFBs will significantly enhance outreach of scheme to these segments. Under this tier, MFBs will either use their own funds or banks will lend to MFBs for onward lending to low-income borrowers of housing finance.

The end-user subsidised markup rate under Tier 1 (housing units of up to five marla and covered area of 850 sq. feet under the NAPHDA projects) has been lowered to 3pc for first five years and 5pc for the next five years. Earlier markup rates were 5pc and 7pc, respectively.

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“This will help to reduce the burden of installments on low-income strata of applicants under NAPHDA projects even more,” said SBP. “Under Tier 2 and Tier 3 of the scheme, keeping in view the limited supply of eligible housing units especially during the initial years, the requirement of maximum one-year-old housing unit has been waived till March 31, 2023,” it added. People would now be able to buy old houses available at cheaper prices.

“The maximum allowed financing has also been doubled from Rs3m to Rs6m under Tier 2 and from Rs5m to Rs10m under Tier 3,” said the SBP.

Tier 2 is for houses of up to five marla and apartments with covered area of up to 1250 sq. feet under non-NAPHDA projects. Tier 3 is for houses of up to 10 marla and apartments with covered area of up to 2000 sq. feet under non-NAPHDA projects.

In addition, minimum eligible tenor of housing finance under the scheme has been lowered to five years from the existing 10 years. “This will facilitate individuals desiring to avail shorter-term financing,” stated SBP.

The revised markup subsidy facility will continue to be available through banks across the country.

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