SBP has introduced the mechanism for house financing

The government has launched the markup subsidy scheme to provide concessional housing finance for promoting homeownership such as Naya Pakistan Housing Scheme. The SBP has issued necessary instructions to all Executing Agencies including commercial banks, microfinance banks, and HBFCL.

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The State Bank of Pakistan has circulated a mechanism for the markup subsidy for housing finance and sent it to the relevant authorities to ensure the provision of loans.

According to the circular available on the SBP website since 25th March, it was sent to the presidents, Chief Executives of all Banks, Microfinance Banks, and other Development Finance Institutions (DFIs).

Dawn has reported that the detailed circular has been submitted to all banks and the DFIs on Tuesday, the Executing Agencies (EAs) have been advised to submit their claims to the Development Finance Support Department (DFSD), SBP BSC, Karachi within 15 working days from the end of each quarter.

Reportedly, the EAs will evaluate financing applications of customers as per parameters of markup subsidy scheme for Housing Finance approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks/DFIs on March 25, 2021, and revised from time to time.

This is part of the new initiative by PM Khan to provide housing to low-income strata of the society, under the Naya-Pakistan Housing scheme. The government has ensured the provision of loans and mortgage facilities to the people of Pakistan. For this, many institutional and regulatory changes in the laws of the country.

Read More: LDA City Naya Pakistan housing inaugurated, people can now own houses

What does the circular entail?

According to the circular, the people eligible for the subsidy program include all the men and/or women holding CNIC. The person must be a first-time homeowner, and according to the scheme one person can take the loan facility under this scheme only once.

The facility is divided between and including Tier 0 and Tier 3. The segregation is based on the size of the loan and housing units are divided accordingly.

Tier 0

The Financing under Tier 0 is for a House up to 125 square yards, meaning (5 Marla) or an apartment/flat with a covered area up to 1250 square feet.

The loan can be gotten from microfinance banks for financing housing units under non-NAPHDA projects. The Maximum size of the loan for a Tier 0 House/Apartment is Rs2 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 5 percent, 7 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Tier 1

Under Tier 1, a borrower would get a House up to 125 square yards or 5 Marla with a maximum covered area of 850 sq ft or a Flat/apartment with a maximum covered area of 850 sq ft.

The loan under Tier 1 is available through banks for financing under NAPHDA projects. The maximum size of the loan would be Rs2.7 million.

The interest rates for the Tier 1 housing would be 3 percent for the first five years and 5 percent for the next five years. For loans with tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Read More: Is the promise of Naya Pakistan Housing still standing?

Tier 2

Under Tier 2, the borrower can get a house up to 125 square yards, meaning 5 Marla or an apartment/flat with a covered area up to 1250 square feet.

Financing under Tier 2 is available through banks for financing of housing units under non-NAPHDA projects. The maximum size of the loan would be Rs6 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 5 percent, 7 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

The difference between Tier 0 and Tier 2 is the source of loan and the maximum size of the loan.

Tier 3

Under Tier 3, a borrower can get a house up to 250 square yards, meaning 10 Marla or an apartment/flat with a covered area up to 2000 square feet.

Financing under Tier 3 is also available through banks for financing of housing units under non-NAPHDA projects. The maximum size of the loan would be Rs10 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 7 percent, 9 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Read More: SBP announces major changes in low-cost housing scheme

It is worth mentioning that the circular is subject to change as required by the authorities.

According to the State Bank, the financing facility for a borrower will be sanctioned and disbursed by the EA after completion of documentation formalities.

“No further evaluation on the eligibility of borrowers would be conducted by the State Bank of Pakistan,” said the SBP.

 

 

 

 

 

 

 

 

 

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