KARACHI: The State Bank on Thursday announced major changes in the low-cost housing scheme to facilitate its outreach by lowering the interest rate to three and five per cent while increasing the amount to Rs10 million for borrowers.

The SBP said it has revised its markup subsidy scheme of housing finance significantly to align with the prevailing housing market dynamics.

The scheme had divided the potential borrowers into three tiers. Now, Tier 0 has been added in the scheme to facilitate participation of microfinance banks (MFBs) under the scheme for disbursement of financing of up to Rs2 million per housing unit. Under this Tier, MFBs will either use their own funds or banks will lend to MFBs for onward lending to low-income borrowers of housing finance.

In October last year, the government started providing markup subsidy facility for the construction and purchase of new homes in a bid to promote housing finance to first-time home buyers at subsidised and affordable markup rates.

This facility is being provided with the administrative support of Naya Pakistan Housing and Development Authority (NAPHDA) and implemented by the SBP through banks.

The end-user subsidised markup rate under Tier 1 (housing units of up to five marla and covered area of 850 sq. feet under the NAPHDA projects) has been lowered to 3pc for first five years and 5pc for the next five years. Earlier markup rates were 5pc and 7pc, respectively.

“This will help to reduce the burden of installments on low-income strata of applicants under NAPHDA projects even more,” said the SBP.

“Under Tier 2 and Tier 3 of the scheme, keeping in view the limited supply of eligible housing units especially during the initial years, the requirement of maximum one-year-old housing unit has been waived till March 31, 2023,” said the SBP. Now, people can buy old houses which could be available at cheaper price.

The restriction on first transfer of housing unit and maximum value of housing units have also been removed,” said the SBP.

The central bank said maximum covered area for flats and apartments has been increased whereas covered area restriction has been removed in case of land based housing units.

“The maximum allowed financing has also been doubled from Rs3m to Rs6m under Tier 2 and from Rs5m to Rs10m under Tier 3,” said the SBP.

Tier 2 is for houses of up to five marla and apartments with covered area of up to 1250 sq. feet under non-NAPHDA projects. Tier 3 is for houses of up to 10 marla and apartments with covered area of up to 2000 sq. feet under non-NAPHDA projects.

In addition, minimum eligible tenor of housing finance under the scheme has been lowered to five years from the existing 10 years. “This will facilitate individuals desiring to avail shorter-term financing,” the SBP said.

The revised markup subsidy facility will continue to be available through banks across the country.

“It is expected that revised parameters will further assist in materialising the government’s vision of providing housing to the low and middle-income segments of the society,” said the SBP.

The revised scheme is expected to make access to housing finance much easier for a large number of households who currently do not own a house, the central bank added.

Published in Dawn, March 26th, 2021