KARACHI: Banks approved Rs180 billion in low-cost housing loans in the calendar 2022 so far, which is 11 times higher when compared with the same period last year, said the State Bank of Pakistan (SBP) on Thursday.

Till April 11, banks received applications for Rs409bn compared to just Rs57bn in the same period a year ago, recording an increase of over seven times.

Of the approved applications, a sum of Rs66bn had been disbursed compared to Rs16bn in the same period CY2021.

The overall bank financing to the housing and construction sector almost doubled to Rs404bn in the first quarter of CY22 from Rs204bn in the same period last year.

“Banks have shown strong progress in approving and disbursing the financing under Mera Pakistan Mera Ghar Scheme (MPMG) against the manifold increase in applications by borrowers to avail housing finance,” said the SBP.

“In increasing their housing and construction finance, banks have also achieved the first quarter target of Rs405bn for 2022,” said the SBP.

For improving the provision of financing for the housing and construction sector to increase adequate housing in the country and boost construction sector activities, the State Bank with the support of the government has taken several measures since July 2020.

In October 2020, the government augmented these efforts by introducing the Government Markup Subsidy Scheme, now commonly known as MPMG. Available in both conventional and Islamic modes, this scheme enables banks to provide cheaper financing for the construction and buying of houses to low- and middle-income segments.

Key initiatives taken under MPMG scheme included allowing acceptance of third-party guarantee during the construction period, waiver of debt burden ratio in case of informal income and the introduction of standard facility offer letter by the banks.

The SBP also advised banks to develop and deploy income estimation models for borrowers with informal sources of income.

In addition to gauging readiness, knowledge and appropriateness of behaviour of banking staff towards customers, regular mystery shopping of banking branches was also conducted by State Bank all over the country.

SBP also advised housing and construction finance targets to banks on July 15, 2020. Banks were required to increase their housing and construction finance portfolio to 5pc of their domestic private sector advances by the end of 2021.

As a result, banks’ financing to the housing and construction sector increased to Rs367bn as of Dec 31, 2021 from Rs148bn as of June 30, 2020.

“For 2022, banks have been advised to increase their housing and construction portfolio to 7pc of their domestic private sector advances i.e. up to Rs560bn,” said the SBP.

Published in Dawn, April 15th, 2022