Pakistan’s efforts to offer low-cost housing finance to people having slim resources are gradually gaining momentum.

A scheme in this regard is expected to facilitate hundreds of thousands of people and protect banks from the risk of default by loan-seekers.

More people are now approaching banks and other financial institutions to acquire low-cost housing finance being offered at subsidised rates under the prime minister’s housing scheme. People can acquire loans of up to Rs3 million under the low-cost housing scheme.

“Around 10,000 applications have been received so far under the housing scheme,” State Bank of Pakistan (SBP) Deputy Governor Sima Kamil said while talking to The Express Tribune on the sidelines of an event organised by Pakistan Mortgage Refinance Company (PMRC) for signing risk-sharing agreements with banks on Monday.

PMRC has inked risk-sharing agreements with around a dozen banks over the past couple of months to cover their risk against default by the borrowers taking low-cost housing finance.

The company has set up a fund worth Rs15 billion with support of the World Bank to cover up to 40% losses of banks under the low-cost housing scheme.

“The disbursement is a bit slow,” Kamil said. “The risk-sharing agreements are expected to help accelerate loan disbursements under the low-cost housing scheme.”

She said the central bank had set targets for banks and they were required to disburse at least 5% (Rs330 billion) of their total lending portfolio to the housing and construction sector by the end of current year. This also includes disbursements under the low-cost housing scheme.

“The central bank assigns quarterly targets to banks for housing and construction loans which are being met. Banks are expected to meet the target of disbursing 5% of their portfolio by the end of December 2021,” she said.

Earlier, the banks were reluctant to offer mortgage financing to the people who came under the low-income group due to the risk of default.

So far, banks and other financial institutions have disbursed a few hundred million rupees to people under the scheme. “PM Khan, the SBP and several related committees meet on a weekly basis to give a push to the disbursement process,” said PMRC CEO and Managing Director Mudassir H Khan.

The scheme is now again coming back on track following a break under the Covid-19 pandemic since March 2020.

The low-cost housing finance scheme will get a boost when builders and developers initiate such a scheme.

The Lahore Development Authority has initiated a project offering 4,000 low-cost apartments. Khyber-Pakhtunkhwa is also working on similar projects at the provincial level. Similar projects are also being considered in Balochistan. At the same time, the private sector is considering doing so in Sindh, he added.

The outstanding refinancing by PMRC to banks and other financial institutions for housing and construction has increased to Rs15 billion in the first two and a half years of its operations. “We are set to disburse Rs100 billion in the first five years of operations (2019-23),” Khan stated.

He said the World Bank was set to extend a second credit line of $150 million to PMRC between June and September 2021. The credit line is expected to give a boost to loan disbursements to the housing and construction sector in Pakistan.

The Asian Development Bank (ADB) is also considering a similar credit line for Pakistan.

The refinance company is set to receive Rs3 billion in two to three days, which it has raised through a three-year Sukuk at a fixed rate.

Published in The Express Tribune, March 2nd, 2021.

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