The State Bank of Pakistan (SBP) instructed banks to put on hold further disbursements under Mera Pakistan Mera Ghar (MPMG) scheme till August 31, 2022, and to also pause fresh disbursements under the Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme till July 15, 2022.
A promise was made by the previous Pakistan Tehreek-e-Insaf government to provide five million houses under the banner of Naya Pakistan Housing Program. According to data, only 21,980 low-cost houses have so far been completed while 52,439 are under construction and 95,084 are in their planning phase. The flagship programme was aimed at ensuring availability of adequate housing in Pakistan as well as improving economic activities in the construction sector.
The SBP says that the reason for halting both schemes is the same: “Government of Pakistan is considering to review/revise features of the subject scheme in light of recent developments in the macroeconomic scenario.”
The circular further clarified that in cases where partial disbursements have already been made till June 30, 2022; financial institutions may release the remaining disbursements under MPMG.
Permanent break on Mera Pakistan Mera Ghar?
As per sources at Naya Pakistan Housing & Development Authority (NAPHDA) – a dedicated organisation established in January 2020 through an Act of Parliament to work on the scheme – the disbursement of subsidy under the house financing scheme has already been stopped by banks as the budget 2022-23 has not allocated any fund for it.
The data released by the SBP shows that as of 31 May 2022, PKR 473 billion had been requested, PKR 212 billion had been approved, and PKR 85 billion had been disbursed under MPMG. The outstanding credit for housing and construction stood at PKR 415 billion for the month ending May 2022.
The budget 2022-23 earmarks only PKR 500 million for NAPHDA, which is hardly enough to cater to the subsidy demand of a mere 16,000 to 17,000 under-construction housing units for one year.
“The disbursement has already been stopped soon after the budget 2022-23,” said an official on condition of anonymity, adding that the issue with this programme was also related to the rising volume of subsidy after a huge jump in interest rates.
As per the programme, the government was supposed to meet the remaining interest rate of what it had announced as subsidy under the low-cost housing scheme.
According to the programme, the borrowers were to be charged a financing rate of 3% for the first five years and 5% for the next five years. Under the present interest rate of 13% the government was to bear the remaining interest financing as subsidy. KIBOR + up to 250 bps was decided on for the remaining financing tenor.
Meanwhile, an official at the ministry of finance claimed that “it was realised when banks started demanding funds under the scheme that they have crossed the disbursement limit set for the outgoing fiscal year,” he said.
“Apart from the huge claims of banks, there was a complete lack of coordination among the concerned departments including SBP, banks and ministry of finance, which ultimately resulted in the mess,” he added. According to the official, the issue is now being reviewed at various forums.