Govt to provide easy loans for housing projects

LAHORE: In a ground breaking move, the government has finalized 14 major facilities to support housing projects and ensure access to finance, including the establishment of an Apex Housing Finance Institution.

These recommendations were agreed upon in the last meeting of the Working Group on “Access to Finance” under the  Chairmanship of Hafiz Mian M. Nauman, Convener at Naya Pakistan Housing Development Authority (NAPHDA).

The key recommendations include a single digit policy rate, rationalization of operational cost for banks, and resumptions resumption of markup subsidy on low-cost and affordable housing. It has also proposed mortgage bonds, microfinance institution, and foreclosure laws.

It was also suggested that the “banks should allocate at least 10% of their private sector credit to the Housing and Construction Industry and put in place a Risk Management Framework to mitigate the risks associated with mortgage financing”.

They further proposed strengthening the Pakistan Mortgage Refinance Company through budgetary support and enhanced coordination between banks and financial institutions for subsidized credit facilities.

The group also proposed awareness campaigns and financial literacy programs for consumers and product development of innovative mortgage financing products to address the needs of all income groups.

Dr. Faisal Shafaat, the representative of the State Bank of Pakistan, said that the capital adequacy ratio has been increased to 35 percent and that the banking sector has managed to disburse Rs. 233 billion in mortgage financing. He further said the microfinance policy of SBP, under which Rs 93 billion have been disbursed to the Mera Pakistan Mera Ghar Scheme. 

He, however, pointed out certain issues in implementation and subsidies in light of the IMF Policy, whereupon the Chair proposed relaxation in the policy rates (KIBOR) to facilitate easy and fast-track access to finance for the development of the housing sector. 

The government’s effort to facilitate the housing sector is, indeed, commendable, but the establishment of an Apex Housing Finance Institution marks a significant initiative in the direction of facilitating access to finance for housing projects.

Similarly, innovative mortgage financing products are being developed and microfinance institutions are expanding to serve the needs of low-income groups and ensure more affordable housing.