Banks to give loans for under-construction projects
State Bank of Pakistan. PHOTO: FILE
The State Bank of Pakistan (SBP) on Thursday issued guidelines for banks and development finance institutions (DFIs), enabling them to extend loans for under-construction projects.
According to a statement issued by the central bank, the move will facilitate buyers of under-construction homes to obtain financing.
“Currently, banks are reluctant to provide such financing, which limits the options of home buyers, who need financing to complete units,” it said.
“The guidelines provide a complete framework with necessary risk mitigation elements for the banking industry to support this area of house financing.”
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Essentially, the financing risk of banks will be secured through the mortgage of project land based on specific arrangements with builders.
It elaborated that payments to the builders would be routed through escrow account with no direct access to the sellers until completion of milestones.
Published in The Express Tribune, September 3rd, 2021.
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