Karachi: Banks have so far sanctioned Rs 180 billion in low-cost housing loans in calendar 2022, an increase of 11 times over the same period last year, the State Bank of Pakistan (SBP) said on Thursday.
Banks had received applications worth Rs 409 billion till April 11, compared to just Rs 57 billion in the same period a year ago, registering an increase of more than seven times.
Out of the accepted applications, an amount of Rs 66 billion was disbursed against Rs 16 billion in the same period of CY2021.
The overall bank financing for the housing and construction sector nearly doubled to Rs 404bn in the first quarter of CY22 from Rs 204bn in the same period last year.
“Banks have shown strong progress in approving and disbursing financing under Mera Pakistan Mera Ghar Yojana (MPMG) against a manifold increase in applications by borrowers for availing housing finance,” the SBP said.
“In enhancing their housing and construction finance, banks have also achieved the first quarter target of Rs 405 billion for 2022,” SBP said.
In order to improve the provision of financing for the housing and construction sector to increase adequate housing in the country and to boost construction sector activities, State Bank in association with the government has taken several measures from July 2020.
In October 2020, the government took these efforts forward by introducing the Government Markup Subsidy Scheme, now commonly known as MPMG. Available in both traditional and Islamic modes, the scheme enables banks to provide affordable financing for construction and purchase of low- and middle-income homes.
The major initiatives taken under the MPMG scheme include acceptance of third party guarantees during the construction period, relaxation in debt burden ratio in case of informal income and introduction of standard facility offer letter by banks.
The SBP also advised banks to develop and implement an income estimation model for borrowers with informal sources of income.
Apart from assessing the readiness, knowledge and suitability of banking staff towards customers, State Bank also regularly conducted covert purchases at banking branches across the country.
SBP also advised banks on housing and construction finance targets on July 15, 2020. Banks were required to increase their housing and construction finance portfolios to 5 per cent of their domestic private sector advances by the end of 2021.
Consequently, banks’ funding for the housing and construction sector increased to Rs 367 billion as of December 31, 2021, from Rs 148 billion as of June 30, 2020.
“For 2022, banks have been advised to increase their housing and construction portfolio to 7 per cent of their domestic private sector advances i.e. Rs 560 billion,” the SBP said.
Published in Dawn, April 15, 2022