The State Bank of Pakistan (SBP) has raised the housing finance limit for microfinance bank (MFB) borrowers to Rs5 million, effective August 1, marking a step towards improving affordable housing options in urban and rural areas.
In May 2025, the SBP issued new regulations allowing MFBs to offer housing loans of up to Rs5 million for individuals with an annual income of up to Rs1.5 million after business expenses. This update increases the previous housing loan limit of Rs3 million.Â
However, the financing can only be used for the construction or renovation of homes, not for purchasing land or plots.Â
Loans for land purchase cannot exceed 90% of the land’s market value, and the total amount for land acquisition is capped at 50% of the approved loan. The remaining funds must be allocated for construction.
This development aligns with the government’s focus on providing low-cost housing for lower- and middle-income groups.Â
Last week, the Economic Coordination Committee approved a mark-up subsidy scheme for 50,000 housing units, with a total budget of Rs72 billion for the current fiscal year. This scheme, developed in consultation with the SBP, will soon be presented to the cabinet and circulated to banks for participation.Â
Additionally, the government announced the restoration of tax credits on mortgage facilities for 2025-2026.
Recent interest rate cuts are expected to further stimulate mortgage financing. Since June 2024, the SBP has reduced its benchmark interest rate by 1,100 basis points, bringing it down from 22% as inflationary pressures eased. The SBP maintained its policy rate at 11% in its latest meeting, citing ongoing inflation risks.
