Govt to Launch Loan Options for Home Buyers

The government has finalized 14 key facilities to support housing projects, ensuring better access to finance. Among these initiatives is the establishment of an Apex Housing Finance Institution.

This decision was reached during the most recent meeting of the Working Group on “Access to Finance,” chaired by Hafiz Mian M. Nauman (former MPA Punjab) and Convener at the Naya Pakistan Housing Development Authority (NAPHDA).

Here are the key recommendations of the Working Group on “Access to Finance” to improve access to finance for the housing sector:

1. Reduction of Policy Rate: Lower the policy rate to a single digit and reduce the operating costs of banks.
2. Fixed-Term Loans: Offer loans for fixed terms of 5, 10, and 20 years.
3. Reintroduce Markup Subsidy: Reintroduce a markup subsidy for low-cost and affordable housing.
4. Mortgage Bonds: Introduce mortgage bonds for easier access to finance.
5. Apex Housing Finance Institution: Establish an Apex Housing Finance Institution.
6. Expand Role of Microfinance Institutions (MFIs): Increase MFIs’ involvement in the housing sector.
7. Strengthen Foreclosure Laws: Improve enforcement mechanisms, including property eviction on default.
8. End-User Financing Model: Introduce an end-user financing model for apartment projects.
9. Private Sector Credit Allocation: Require banks to allocate 10% of their private sector credit to the housing and construction industry.
10. Risk Management Framework: Develop a framework to mitigate risks associated with mortgage financing (e.g., insurance).
11. Strengthen PMRC: Provide budgetary support to the Pakistan Mortgage Refinance Company (PMRC) and enhance collaboration with banks and financial institutions for subsidized credit facilities.
12. Awareness and Financial Literacy: Launch awareness campaigns and financial literacy programs to educate consumers.
13. Innovative Mortgage Financing Products: Develop financing products to cater to all income groups, including:
    • Incremental housing microfinance.
    • Community-based housing projects (e.g., pooling resources and collaborating with local NGOs).
    • Subsidized rental housing.
    • Takaful-based housing insurance products.
    • Help-to-buy equity loans for first-time home buyers.
    • Fixed-for-life mortgages (fixed rate).
    • Green mortgages.
    • Buy-to-let mortgages for rental income properties.
    • Offset mortgages linked to savings accounts.
14. Collaboration with Real Estate Developers: Partner with real estate developers to offer mortgage financing options for consumers/allottees.
15. Digital Mortgage Platforms: Develop digital mortgage platforms using blockchain for secure and transparent financing.
16. Encourage Fintech Solutions: Promote fintech companies to create innovative mortgage financing solutions.
17. Strengthen HR Capacity: Build the capacity of financial institutions’ human resources in mortgage financing.

According to sources, Dr. Faisal Shafaat, a representative of the State Bank of Pakistan (SBP), provided a comprehensive briefing on their regulatory framework, focusing on prudential regulations.

He outlined that the capital adequacy ratio had been increased to 35%, enabling the banking sector to disburse Rs. 233 billion in mortgage financing. Additionally, he discussed SBP’s microfinance policy aimed at improving access to finance for low-income groups. Under the Mera Pakistan Mera Ghar (MPMG) Scheme, Rs. 93 billion had been disbursed.

Dr. Faisal also highlighted various execution and subsidy challenges linked to the IMF policy. In response, the Chair advocated for a relaxation in policy rates (KIBOR) to promote easier and faster access to finance for the growth and development of the housing sector.