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SBP issues mechanism for housing loan payment

SBP issues mechanism for housing loan payment

KARACHI: The State Bank of Pakistan (SBP) has developed a complete mechanism for payment of markup subsidy for housing finance and sent it to banks and development finance institutions (DFIs) who are working as Executing Agencies (EAs) for the facility.

In a detailed circular to all banks and DFIs on Tuesday, the EAs have been advised to submit their claims to Development Finance Support Department (DFSD), SBP BSC, Karachi within 15 working days from the end of each quarter.

However, EAs will submit their claim within 15 working days for the quarter ending December 2020 and March 2021 from the date of issuance of this circular.




The SBP said that EAs will evaluate financing applications of customers as per parameters of markup subsidy scheme for Housing Finance approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks/DFIs on March 25, 2021 and revised from time to time.

The government has launched the markup subsidy scheme to provide concessional housing finance for promoting home ownership. The SBP has issued necessary instructions to all EAs including commercial banks, microfinance banks and HBFCL.

Under the scheme, loans are segregated into four tiers. Tier 0 (T0) a house up to 125 sq yds (5 Marla) and (b) flat or apartment with maximum covered area of 1,250 sq ft; a customer will pay five per cent for first five years and 7pc for next 5 years.

For Tier 1 a house up to 125 sq yds (5 Marla) with maximum covered area of 850 sq ft and (b) Flat or apartment with maximum covered area of 850 sq ft, the interest rates for this category are 3pc for first 5 years and 5pc for next 5 years. For Tier 2 a house up to 125 sq yds (5 Marla) and (b) flat or apartment with maximum covered area of 1,250 sq ft; a customer will pay 5pc for first 5 years and 7pc for next 5 years.

For Tier 3 a house up to 250 sq yds (10 Marla) and (b) flat or apartment with maximum covered area of 2,000 sq ft. a customer will pay 7pc for first 5 years and 9pc for next 5 years.

“For loan tenors exceeding 10 years, market rate i.e. bank pricing will be applicable for the period exceeding 10 years,” said the SBP circular.

The financing facility for a borrower will be sanctioned and disbursed by the EA after completion of documentation formalities.

“No further evaluation on eligibility of borrowers would be conducted by the State Bank of Pakistan,” said the SBP.

For first five years, an Equally Monthly Installment (EMI) amortisation schedule would be prepared for full tenor of financing at markup rate i.e. 3pc, 5pc or 7pc depending upon the financing tier.

Published in Dawn, April 21st, 2021

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