SBP further eases housing finance
A Reuters file image of SBP logo
The government has further relaxed the rules for housing finance and allowed individual buyers to obtain loans for residential units in projects under development.
“In order to further facilitate buyers of housing units in under construction projects, the requirement of builder/ developer to avail construction financing is being relaxed,” said the central bank in a notification issued on Friday. “Accordingly, buyers of homes in developing projects may avail housing finance against their units in the scheme where builder or developer has not availed construction financing.”
In such cases, the builder or developer would be liable to create mortgage charge over project’s land in favour of bank or development financial institution (DFI) through an agreement.
“The charge will only be vacated after completion of the project and transfer of housing units to the purchasers.”
Any bank or development finance institution can extend housing finance to a purchaser of a housing unit in projects that are under development.
However, if the purchaser wants to avail financing from a bank or DFI other than mortgagee institutions, then he would have to obtain a no objection certificate (NOC) from the mortgagee bank/DFI.
Moreover, the bank/ DFI that finances such purchasers would also be required to enter into bilateral arrangement with the mortgagee bank/ DFI to secure its risk.
With regard to the requirement of informed consent, “it is clarified that the builder/developer will be responsible to arrange written consent from the customers who intend to purchase housing units from their own sources without availing mortgage finance.”
“The letters of written consent of such purchasers will be submitted to the bank/ DFI in original by the builder or developer.”
Earlier, the central bank directed commercial banks to increase the minimum amount of housing loans to 7% of their total disbursement to the private sector in 2022. Prior to this, banks were given 18 months to disburse a total of 5% for the period ended December 31, 2021.
Banks approved a total of Rs355 billion during 2021, including Rs38 billion for low-cost housing schemes.
According to estimates, Pakistan is facing a shortage of around 12 million housing units as demand for homes remains high compared to supply.
The lack of financing options restrained people from owning housing units.
The present government is taking measures to ease the availability of finance by subsidising it, especially for residential units costing upto Rs6 million.
In the mid of February 2022, the government relaxed rules for availing housing finance for low cost units having a value of Rs3 million.
The government cut the markup rate, increased subsidy payment and the period for repayment of loan to 15 years from 10 years earlier.
Published in The Express Tribune, February 27th, 2022.
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