SBP sets target to boost housing finance

State Bank of Pakistan tells banks to raise housing loan portfolio to 5% of private sector credit

KARACHI:

The State Bank of Pakistan (SBP) has decided to set a mandatory target for commercial banks for extending mortgage loans and financing for developers and builders.

“Banks will be required to increase their housing and construction of building loan portfolios to at least 5% of their private sector credit by the end of December 2021,” the SBP said in a statement on Wednesday.

The move is aimed at improving the quality of living conditions for the common people and the construction of housing with linkages to dozens of allied industries offers substantial potential for boosting economic activities in the country. This, however, requires a considerable amount of financing to meet investment needs of the sector.

In Pakistan, bank financing for mortgages and housing construction is less than 1% of gross domestic product (GDP), which is one of the lowest in the region.

“Keeping in view the need for housing and its contribution to the economy, the government is aiming to increase the number of housing units manifold in the coming years,” the central bank said.

While issuing mandatory targets, the SBP said banks had been asked to gear up appropriately by developing their infrastructure and capacity to meet the targets.

Furthermore, the central bank instructed banks to present a concrete action plan, within 15 working days, containing quarterly targets, development of products, media campaigns, development of technology infrastructure, and capacity building of staff, amongst other areas. Banks were also directed to report the data of approvals and disbursements against the targets every month, starting from September 2020.

Published in The Express Tribune, July 16^th, 2020.

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