Tag: low cost housing

KARACHI: State Bank of Pakistan (SBP) on Thursday issued revised mark up subsidy allowed by the government for low cost housing scheme.

The SBP issued instructions to the banks for implementation of the revised mark up subsidy approved by the government.

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

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.

The SBP directed the banks 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.

KARACHI: The State Bank of Pakistan (SBP) on Friday amended regulations to incentivize banks for financing low cost and affordable housing.

A statement said that the central bank is constantly providing enabling regulatory environment to promote housing and construction finance.

This is an important sector that has significant economic linkages with other sectors in the economy and the current level of credit provision in this sector is at a very low level of less than 1 percent of GDP which is much lower than in other similar countries and in the region.

To support the provision of finance to this sector and especially facilitate affordable housing, SBP has now announced five regulatory relaxations to incentivize banks for financing low cost and affordable housing.

Firstly, the definition of low cost housing finance used in the current regulations for banks has been aligned with definition used under Government Markup Subsidy Facility for Housing Finance eligible under Tiers I & II of housing finance.

Specifically, in the SBP regulations, the value of housing unit has been increased from Rs 3 million to Rs 3.5 million with maximum loan size increased from Rs 2.7 million to Rs 3.15 million. Consequently, the incentive for low cost housing finance will increase for banks as they will not only be able to enjoy markup subsidy facility by the Government but the regulatory incentives under low cost housing finance by SBP as well.

Current regulations and banking practices require banks to obtain documentary evidence of income. Provision of this information is difficult for people generating income from informal sources which are generally in low income segments.

In order to facilitate financing for this segment, State Bank is urging the banks to use alternate methods to identify income sources and assess the credit worthiness of the borrower.

The 2^nd and 3^rd type of relaxations are being given to facilitate financing for this segment. Accordingly, under 2^nd relaxation, banks have been exempted from the requirement of using ‘verifiable income’ for the purpose of calculating Debt Burden Ratio (DBR) in case of low cost housing finance where banks are using income proxies and where income of borrower is not verifiable.

Resultantly, borrowers with ‘non-verifiable income,’ estimatedby banks using income proxies, will also become eligible to avail low cost housing finance.

Thirdly, banks have also been exempted from the requirement of observing DBR, in case of low cost housing finance, where banks are using repayment surrogates like rent, utility bills, telcos bills, etc. to assess repayment capacity of borrower. Hence, borrowers without verifiable or non-verifiable income will become eligible to avail low cost housing finance.

Fourthly, banks have been exempted from the requirement of Internal Credit Risk Rating System for the low cost housing finance till September 30, 2022 as their current systems do not specifically cater for low cost housing finance.

Accordingly, borrowers of low cost housing finance who cannot avail financing due to banks internal credit rating criteria will now become eligible if the bank is otherwise satisfied. This time barred relaxation will provide banks to develop their Internal Credit Risk Rating Systems for low cost housing finance.

Finally, in order to provide comfort to the borrowers who have liquid securities or already have a housing unit, banks have been allowed to extend housing finance for purchase/construction of a residential property by accepting existing residential property or liquid securities in lieu of equity contribution for housing finance at the time of calculations of Loan to Value ratio.

 Financing bank will create its lien on existing residential property/liquid securities in addition to mortgage of residential property being financed.

It is expected that the above regulatory incentives would provide further impetus to SBP’s on-going efforts to accelerate housing and construction finance in Pakistan. It is reminded that banks have already been given mandatory targets of 5 percent of their private sector advances as housing and construction finance by December 31, 2021.

KARACHI: The State Bank of Pakistan (SBP) has allowed certain exemptions and relaxations in prudential regulations for promoting low cost housing finance.

A circular issued a day earlier, the SBP said that in order to promote low cost housing finance in the country, it has been decided to define the low cost housing as part of SBP’s regulatory framework and allow certain regulatory relaxations for banks/DFIs.

To qualify under low-cost housing finance, the borrower has to fulfill the following criteria:

• Maximum value of the housing unit/apartment up to Rs3 million

• Covered area of the housing unit / apartment up to 850 square feet in urban areas

• Loan size up to Rs2.7 million

To further encourage and facilitate the Banks/DFIs to pursue low-cost housing finance, regulatory exemptions/relaxations in the following Prudential Regulations (PRs) for housing finance are being advised:

i. Regulation HF 4: Loan to Value Ratio (LTV): LTV ratio of upto 90:10 shall be maintained for low cost housing finance.

ii. Regulation HF 5: Limit on Exposure against Real Estate Sector: Financing extended to low cost housing, shall be exempted from exposure limit of 10 percent on real estate sector.

iii. Regulation HF-7: Property Assessment: For the purpose of financing low cost housing units, banks/DFIs are allowed to apply the valuation of single unit on all the units of the same society/colony instead of conducting separate valuation for each unit constructed on the same layout and size.

iv. Regulation HF 9: General Reserve against Housing Finance: Banks/DFIs are exempted from general reserve requirement against the financing extended to low cost housing.

Banks/DFIs have been directed to ensure circulation of these exemptions/relaxations in the regulations for housing finance among all their offices/branches for meticulous compliance in letter and spirit.

KARACHI: State Bank of Pakistan (SBP) on Monday launched Sharia compliant loans for low cost housing for special segments.

In a circular issued by the central bank stated that in order to facilitate availability of long-term affordable funding to some of the selective low income segments, SBP had launched a “Financing Facility for Low Cost Housing for Special Segments” through IH&SMEFD Circular No. 05 of 2019.

In this regard, SBP is also introducing a Mudarabah based “Islamic Financing Facility for Low Cost Housing for Special Segments” (The Facility) for Islamic Banking Institutions (IBIs) and Islamic DFIs; collectively referred as Participating Islamic Financial Institutions (PIFIs).

Salient features of the financing facility are as under:

Participants: All Banks/DFIs

Loan Amount: Up to Rs. 2.7 million

Refinance: Up to 100 percent by SBP

Scope: Widows, Children of martyrs, Special persons, Transgender, and Persons in areas severely affected by terrorism.

Eligibility of Borrower: First time home owner; Must not have availed housing finance previously; For construction of a new housing unit; Maximum value of the housing unit up to Rs. 3 million; The financing for plot to be purchased for constructing house shall be allowed upto Rs1 million only

Loan Tenor: Up to 12½ years

Under this facility, the central bank said that Mudarabah investment of SBP shall be available for up to 100 percent of the amount financed to eligible customers.

SBP shall make Mudarabah investment in general pool of the PIFI.

PIFIs may submit their requests for allocation / assignment of limits under this facility to be evaluated by SBP as per its internal criteria. Yearly limits shall be allocated to individual PIFI under the Scheme.

Applications for sanction of limits for each fiscal year (July-June basis) shall be sent by the interested PIFIs to the Director, Infrastructure, Housing & SME Finance Department, latest by May 15 each year to facilitate sanction of annual limits at the earliest.

For the current year, the request for sanction of limits may be submitted within 30 days from the date of issuance of this circular.