State Bank of Pakistan has introduced the mechanism for house financing

The government has launched the markup subsidy scheme to provide concessional housing finance for promoting home ownership such as Naya Pakistan Housing Scheme. The SBP has issued necessary instructions to all Executing Agencies including commercial banks, microfinance banks, and HBFCL.

According to the circular available on the SBP website since 25th March, it was sent to the presidents, Chief Executives of all Banks, Microfinance Banks, and other Development Finance Institutions (DFIs).

Dawn has reported that the detailed circular has been submitted to all banks and the DFIs on Tuesday, the Executing Agencies (EAs) have been advised to submit their claims to the Development Finance Support Department (DFSD), SBP BSC, Karachi within 15 working days from the end of each quarter.

The facility is divided between and including Tier 0 and Tier 3. The segregation is based on the size of the loan and housing units are divided accordingly.

Tier 0

The Financing under Tier 0 is for a House up to 125 square yards, meaning (5 Marla) or an apartment/flat with a covered area up to 1250 square feet.

The loan can be gotten from microfinance banks for financing housing units under non-NAPHDA projects. The Maximum size of the loan for a Tier 0 House/Apartment is Rs2 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 5 percent, 7 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Tier 1

Under Tier 1, a borrower would get a House up to 125 square yards or 5 Marla with a maximum covered area of 850 sq ft or a Flat/apartment with a maximum covered area of 850 sq ft.

The loan under Tier 1 is available through banks for financing under NAPHDA projects. The maximum size of the loan would be Rs2.7 million.

The interest rates for the Tier 1 housing would be 3 percent for the first five years and 5 percent for the next five years. For loans with tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Tier 2

Under Tier 2, the borrower can get a house up to 125 square yards, meaning 5 Marla or an apartment/flat with a covered area up to 1250 square feet.

Financing under Tier 2 is available through banks for financing of housing units under non-NAPHDA projects. The maximum size of the loan would be Rs6 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 5 percent, 7 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

The difference between Tier 0 and Tier 2 is the source of loan and the maximum size of the loan.

Tier 3

Under Tier 3, a borrower can get a house up to 250 square yards, meaning 10 Marla or an apartment/flat with a covered area up to 2000 square feet.

Financing under Tier 3 is also available through banks for financing of housing units under non-NAPHDA projects. The maximum size of the loan would be Rs10 million.

The Tenure of the loan is a minimum of five years and a maximum of twenty years, depending upon the borrower’s choice. For the first five years, the interest rate would be 7 percent, 9 percent for the next five years, and for loan tenure greater than 10 years, the market rate would be applied after the first 10 years of the borrowing date.

Copy of State Bank of Pakistan Circular

 IH&SMEFD Circular No. 03 of 2021
March 25, 2021

The Presidents/Chief Executives
All Banks/Microfinance Banks/DFIs

Dear Sir(s)/Madam(s),

Government’s Mark-up Subsidy Scheme for Housing Finance


Please refer to IH&SMEFD Circular No. 11 of 2020 whereby the captioned Government’s Mark-up Subsidy Scheme (G-MSS) for Housing Finance was introduced.

2. In view of the feedback received from various stakeholders, Government of Pakistan (GoP) has decided to revise features of the G-MSS to align it with market dynamics. These revisions aim at significantly enhancing outreach of Scheme to the individuals and households who currently do not own a house. The key features of the revised G-MSS approved by the GoP are given below:


Particulars


Mark up Subsidy Program



Eligibility Criteria


  • All men/women holding CNIC
  • First time home owner
  • One individual can have subsidized house loan facility under this scheme only once



Tiers of the Scheme


  • Financing under Tier 0 is available through microfinance banks for financing of housing units under non-NAPHDA projects.
  • Financing under Tier 1 is available through banks for financing under NAPHDA projects
  • Financing under Tier 2 and Tier 3 is available through banks for financing of housing units under non-NAPHDA projects


Size of Housing Unit


   Size of the loan is segregated into four tiers, as under:

  • Tier 0 (T0) – (a) House upto 125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft.
  • Tier 1 (T1) – (a) House upto 125 sq yds (5 Marla) with maximum covered area of 850 sq ft and (b) Flat/apartment with maximum covered area of 850 sq ft.
  • Tier 2 (T2) – (a) House upto 125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft.
  • Tier 3 (T3) – (a) House upto 250 sq yds (10 Marla) and (b) flat/apartment with maximum covered area of 2,000 sq ft.


Age of housing units



   Newly constructed housing units during last one year from the date of application. However, this    requirement will not be applicable till March 31, 2023 under Tier 0, Tier 2 and Tier 3.



Maximum Price of Housing Units


   Maximum Price (Market Value) of a single housing unit at the time of approval of financing, as under:
   Tier 1 (T1) – Rs 3.5 million
   Tier 0 (T0), Tier 2 (T2) and Tier 3 (T3) – No cap



Maximum Loan size


   Maximum size of the loan of a single housing unit, as under:
   Tier 0 (T0) – Rs 2.0 million
   Tier 1 (T1) – Rs 2.7 million
   Tier 2 (T2) – Rs 6.0 million
   Tier 3 (T3) – Rs 10.0 million



Loan type



   Long term housing finance loans



Loan Tenor



   Minimum 5 years and maximum 20 years loan tenor, depending upon choice of customers.



Security Requirements



   As per banks’credit policy and prudential regulations for housing finance, the housing unit financed will be    mortgaged in favor of financing bank.


Allocation in Budget


   Finance Division shall give authority to SBP to debit GOP account on quarterly basis for the subsidy    payment to banks.

   Payment will be made to the banks on submission of quarterly-consolidated subsidy statement as per    format prescribed by State Bank.



Pricing


   Pricing for Housing Loans:

Loan Tiers

Customer Pricing

Bank Pricing

Tier 0

5% for first 5 years &
7% for next 5 years

KIBOR+700 BPS

Tier 1

3% for first 5 years &
5% for next 5 years

KIBOR+250 BPS

Tier 2

5% for first 5 years &
7% for next 5 years

KIBOR+400 BPS
(Spread may vary)

Tier 3

7% for first 5 years &
9% for next 5 years

For loan tenors exceeding 10 years, market rate i.e. bank pricing will be applicable for the period exceeding 10 years.




Executing Agency


   All commercial banks including Islamic banks, microfinance banks and House Building Finance Company    Limited (HBFCL)



Application Form


   A standardized Application Form both in English and Urdu will require minimum essential information with    simple format.

   The processing time will not exceed 30 days after submission of all documents by the borrower and the    same will be clearly stated in the application form.



Standardized Procedures

   Banks to have standardized loan documents and risk acceptance criteria


Monitoring


   SBP will publish consolidated information about the loans extended under this program for information of    the public on quarterly basis on its website.



Geographical distribution

   Whole of Pakistan


3. The revised features are applicable with immediate effect. Accordingly, IH&SMEFD Circular No. 11 of 2020 is hereby superseded. However, instructions notified vide IH&SMEFD Circular No. 01 of 2021 will continue to remain applicable.

4. The banks are advised to ensure successful implementation of revised G-MSS through dissemination of necessary instructions to branches/ regions, capacity building of field staff, alignment of housing finance products and active marketing campaigns, etc.

5. Please acknowledge receipt.



Sincerely yours,

Sd/-


(Dr. Mian Farooq Haq)
Director

 
 
 

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