KARACHI: State Bank of Pakistan (SBP) on Monday announced interest rates for loan obtained under Naya Pakistan Housing scheme.
The maximum size of loan shall be Rs5 million and the loan shall be available for the maximum limit at 7 percent for first five years and at 9 percent for remaining five years. The bank prices shall be KIBOR + 4 percent.
The SBP said that in line with its vision of providing affordable housing to the masses, Government of Pakistan will be providing a markup subsidy facility for the construction and purchase of new houses.
This facility will allow all individuals, who will be constructing or buying a new house for the first time, to avail bank’s financing at subsidized and affordable markup rates.
This facility will be provided with the administrative support of State Bank of Pakistan as executing partner with Government of Pakistan and Naya Pakistan Housing and Development Authority (NAPHDA).
The government has allocated Rs33 billion for payment of markup subsidy for financing over a period of 10 years and has assured continuity of the facility.
For this purpose, State Bank and Government of Pakistan have signed a memorandum of understanding.
The markup subsidy facility will be available through all banks and is divided in three tiers:
Financing under Tier I is available for purchase of houses/apartments/flats of upto 5 marla or 125 sq. yards, with maximum covered area of 850 sq. feet and maximum price of Rs. 3.5 million, under NAPHDA projects. Maximum financing under this Tier is Rs. 2.7 million with maximum tenor of up to 20 years. Banks will charge maximum markup rate of KIBOR plus 250 basis points.
However, GOP will provide markup subsidy to reduce borrowers’ rate to 5 percent for first five years and 7 percent for next five years.
KIBOR is the Karachi Interbank Offer Rate that is determined in the interbank market on a daily basis and is used as a benchmark for most of the retail lending by banks.
These rates are published on the website of State Bank of Pakistan on a daily basis.
Financing under Tier II is also for houses/apartments/flats upto 5 marla or 125 sq. yards with maximum covered area of 850 sq. feet and maximum price of Rs 3.5 million.
Maximum financing under this Tier is Rs 3 million with maximum tenor of up to 20 years. This Tier facilitates construction or purchase of housing units by individuals and households who have not applied or qualified for NAPHDA projects.
Banks will charge maximum markup rate of KIBOR plus 400 basis points. However, subsidized rate for the borrowers for first 10 years under Tier 2 is the same as that of Tier I.
The Tier III of the facility promotes affordable housing for middle-income families. This Tier allows subsidized financing for construction or purchase of houses/apartments/flats of more than 5 marla (125 sq. yards) and upto 10 marla (250 sq. yards) with maximum covered area from 850 sq. feet to 1,100 sq. feet and maximum price of Rs 6 million.
Maximum financing under this Tier is Rs. 5 million with maximum tenor of up to 20 years. Banks will charge maximum markup rate of KIBOR plus 400 basis points. However, GOP will provide markup subsidy to reduce borrowers’ rate to 7 percent for first five years and 9 percent for next five years.
It is expected that introduction of the facility with supply of fresh housing units through concerted efforts of NAPHDA and other stakeholders will help transform Government’s vision into reality.
The SBP issued following rates and criteria through a circular:
Markup Subsidy for Housing Finance
1. Housing plays an important role in economic development by contributing in GDP growth, employment generation and social wellbeing. Further, more than 40 industries and 70 percent of unskilled labor are linked with housing and construction sector.
2. In order to provide formal financial services at affordable rates, Government of Pakistan is providing Markup Subsidy for Housing Finance. The key features of the facility approved by the Government are given below:
| Particulars | Markup 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 Only for construction and first purchase of newly constructed affordable housing units |
| Size of Housing Unit | Size of the loan is segregated into three tiers, as under: Tier 1 (T1) – Housing Units/apartments of up to 125 square yards (upto 5 Marla) with covered area of up to 850 square feet. (NAPHDA) Tier 2 (T2) – Housing Units/apartments of up to 125 square yards (5 Marla) with covered area of up to 850 square feet. Tier 3 (T3) – Housing Units of more than 125 square yards up to 250 square yards (10 Marla) or apartments with covered area from more than 850 square feet to 1,100 square feet. |
| 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 2 (T2) – Rs 3.5 million Tier 3 (T3) – Rs. 6.0 million |
| Maximum Loan size | Maximum size of the loan of a single housing unit, as under: Tier 1 (T1) – Rs 2.7 million Tier 2 (T2) – Rs 3.0 million Tier 3 (T3) – Rs. 5.0 million |
| Loan type | Long term housing finance loans |
| Loan Tenor | 10/15/20 years, 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 of Pakistan. |
Pricing | Pricing for Housing Loans: Tier-1: 5% for first 5 years & 7% for next 5 years at KIBOR+250 BPS Tier-2: 5% for first 5 years & 7% for next 5 years at 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 will be applicable for the period exceeding 10 years. |
| Executing Agency | All commercial banks including Islamic 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 | Geographical distribution |
3. Banks can also avail risk coverage against the housing finance under the scheme from Pakistan Mortgage Refinance Company (PMRC) at mutually agreeable terms and conditions.
4. The banks are advised to ensure successful implementation of this facility through dissemination of necessary instructions to branches/ regions and capacity building of field staff, development/alignment of financing products and marketing campaigns, etc.
