The federal government on Friday approved changes to some features of the “Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance” in an effort to promote affordable housing in the country.
According to a notification issued by the Ministry of Housing and Works, the changes were made after a decision by the Economic Coordination Committee (ECC), which was later approved by the federal cabinet.
Under the updated plan, the eligibility requirements for the scheme will stay the same. The facility will still be available for first-time homebuyers who are Pakistani citizens with valid CNICs and do not own a house in their name.
The scheme will continue to provide financing for buying a house or flat, building a house on a plot that the applicant already owns, or buying a plot and then constructing a house on it.
As approved by the ECC, the size of housing units included in the scheme will remain houses of up to 5 marla and flats or apartments of up to 1,500 square feet.
Different financial institutions will take part in the programme, including commercial banks, Islamic banks, microfinance banks and the House Building Finance Company Limited (HBFCL).
Under the revised terms, the maximum loan amount has been increased to up to Rs10 million. The loan period will remain up to 20 years, while the government will provide a markup subsidy for the first 10 years.
Banks will set their pricing at one-year KIBOR plus 3 percent, but borrowers will pay a fixed markup rate of 5 percent for both tiers. Earlier, borrowers in Tier-2 had to pay a higher rate.
The loan-to-value ratio will remain 90:10, which means banks will provide 90 percent of the financing, while the borrower will contribute 10 percent from their own funds.
The government will also offer risk coverage equal to 10 percent of the outstanding loan portfolio on a first-loss basis under the scheme.
The programme aims to support the construction or purchase of 500,000 housing units over the next four years. The target includes 50,000 units in the fiscal year 2025-26, 100,000 units in 2026-27, 150,000 units in 2027-28, and 200,000 units in 2028-29.
The State Bank of Pakistan (SBP) will implement the scheme in coordination with the Pakistan Housing Authority-Foundation and the participating financial institutions.
The notification also states that to maintain uniformity, the interest rate on loans that were already issued at 8 percent will now be reduced to 5 percent.
All related institutions, including the Ministry of Finance, SBP and participating banks, have been instructed to take the necessary steps to put the revised scheme into effect.
