The government is working on setting up a regulatory body for the country’s housing finance market which is experiencing an accelerated growth and is currently regulated by the State bank of Pakistan (SBP).
In this regard, Finance Minister Shaukat Tarin while unveiling the economic plan for sustainable growth earlier this week revealed that the regulatory authority by the name of ‘Pakistan Housing Bank’ will be established “in due course of time”.
According to a report by Dawn which quoted Economic Advisory Council (EAC) member Arif Habib, the function of housing finance will be devolved “out of the commercial banking arena” through the formation of housing finance institutions/companies.
“Housing finance companies will be from the private sector. The idea is to create an enabling environment for the private sector so that it can pursue housing finance as an exclusive business,” he said, adding that the government is going to encourage banks to provide housing finance companies with funds so that the new entities can scale up their operations.
“They will also be allowed to raise funds through market instruments”.
It is pertinent to mention here that no housing finance company existed in Pakistan until recently whereas the SECP issued licences to three such companies which are expected to commence operations in the current year.
Outstanding consumer financing for house building amounted to Rs106.8 billion at the end of July, up 32.7 per cent from a year ago. Similarly, outstanding loans for building construction were Rs97.9bn at the end of last month, up 42pc from July 2020, SBP data shows.
The government has set aside Rs36bn for its housing loan mark-up subsidy scheme to promote affordable housing over a 10-year period. It is offering through commercial banks 20-year mortgages at 3pc, 5pc, 7pc and 9pc annual rates depending on the property’s size and value. Its target is to achieve outstanding housing finance equalling at least 5pc of the total private-sector credit by the end of this year.
As of April 20, banks had received applications for financing of more than Rs52bn from the general public under this scheme with the approved amount of more than Rs15bn.
