KARACHI: The government is reshaping the Mera Pakistan, Mera Ghar (MPMG) low-cost housing scheme, stating that the interest rate has gone up to 15 per cent while financing was being provided at much lower rates.

In a tweet on Saturday, Finance Minister Miftah Ismail said the government is reshaping the scheme and assured people that no one will lose money.

“Many people are writing to me that their loans were approved in the Mera Ghar Scheme and that they have spent money based on that approval,” said the minister.

“I want to assure you that we are reshaping this scheme and no one will lose their money,” he said, adding that he would resolve this issue within the next week.

Investors are mostly worried about interest rates, which were subsidised by the previous government to boost the housing and construction sectors. However, the new government engaged with the International Monetary Fund (IMF) for an agreement and has withdrawn a number of subsidies in different sectors. The most significant withdrawal of subsidies, which sharply increased inflation, was the price of petrol and diesel.

The State Bank of Pakistan also increased the Export Finance Scheme rate to 10pc from 7pc and long-term finance was also increased to 10pc from 7.5pc. The investors in the MPMG scheme are rightly worried about the interest, which has been increasing with an uptick in inflation.

The MPMPG scheme offers 3pc for the first five years, 5pc for the next five years and Kibor+ up to 250bps for the remaining financing tenor. The offered rates now for low-cost housing look extremely lower than the actual policy rate of 15pc, while the IMF seems to see a withdrawal of all subsidies available for trade, industry, and the general public.

Banks have approved loans of Rs180 billion for low-cost housing during the calendar year 2022, till April 11, which was eleven times higher than the last year.

According to an SBP report, till April 11, 2022, banks received applications for housing finance amounting to Rs409bn, which was merely Rs57bn a year ago, reflecting an increase of more than 7 times. Out of these, banks have approved applications amounting to Rs180bn and disbursed Rs66bn against the approved applications.

This shows an increase in approvals of applications of more than 11 times as, a year ago, till April 2021, the banks had approved only Rs16bn.

Banks almost doubled their housing and construction finance portfolios to Rs404bn as of March 31, 2022 from Rs204bn a year earlier.

By the end of 2021, banks were required to increase their housing and construction finance portfolio to 5pc of their domestic private sector advances. As a result, banks’ lending to the housing and construction sector increased to Rs367bn as of December 31, 2021 from Rs148bn as of June 30, 2020.

Published in Dawn, July 17th, 2022