Government Cuts Markup Rate for Housing Finance Scheme

The federal government has approved changes to certain features of the “Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance” to promote affordable housing nationwide.

According to a notification issued by the Ministry of Housing and Works, the changes were approved by the Economic Coordination Committee (ECC) and later confirmed by the federal cabinet.

Under the revised plan, the eligibility criteria will remain the same. The scheme will still be available only to first-time homeowners who are Pakistani citizens, have a valid CNIC, and do not own a house or apartment in their name.

The scheme allows people to get financing for different purposes. These include buying a house or apartment, building a house on an already owned plot, or buying a plot and then constructing a house.

The approved housing size under the programme includes houses up to 5 marla and flats or apartments up to 1,500 square feet, as decided by the ECC.

Several financial institutions will participate in the programme. These include commercial banks, Islamic banks, microfinance banks, and the House Building Finance Company Limited (HBFCL).

Under the revised rules, the maximum loan amount has been increased to Rs10 million. The loan period will remain up to 20 years, while the government will provide a markup subsidy for the first 10 years.

Banks will set their pricing at one-year KIBOR plus 3 percent, but people taking the loan will pay a fixed markup rate of 5 percent. Previously, borrowers in the second tier paid a higher rate.

The loan-to-value ratio will remain 90:10, which means the bank will provide 90 percent of the financing, while the borrower will contribute 10 percent from their own funds.

The government will also provide risk coverage of 10 percent of the outstanding loan portfolio on a first-loss basis to support the scheme.

The programme aims to help finance 500,000 housing units within four years. The target includes 50,000 units in 2025-26, 100,000 units in 2026-27, 150,000 units in 2027-28, and 200,000 units in 2028-29.

The State Bank of Pakistan (SBP) will implement the scheme with the help of the Pakistan Housing Authority-Foundation and participating banks.

The notification also stated that the existing 8 per cent interest rate will be reduced to 5 per cent to maintain uniformity across the system.

Relevant departments, including the Ministry of Finance, SBP, and participating banks, have been directed to take the necessary steps to implement the revised housing scheme.