Housing, construction finance posts sharp rise of Rs111 billion in FY21: SBP governor

KARACHI: The housing and construction finance registered a significant increase of Rs111 billion, or 75 per cent during FY21, compared with FY20, to reach Rs259 billion by the end of June 2021, a statement quoted a senior government official, as saying, on Thursday.

Briefing Prime Minister Imran Khan in a meeting of the National Coordination Committee on Housing, Construction and Development (NCCHCD) held on Wednesday, State Bank of Pakistan (SBP) Governor Dr Reza Baqir said that an increase of this quantum in the housing and construction finance in a year is unprecedented in Pakistan’s history. As a result, 97 per cent of the overall target set by the central bank for June 30, 2021 was met.

The federal ministers for finance, information, aviation, and climate change, Naya Pakistan Housing and Development Authority (NAPHDA) chairman, state minister for information and broadcasting, special assistant to the prime minister on political communication, presidents and CEOs of banks and senior SBP officials, were present on the occasion.

The prime minister appreciated the efforts of the State Bank of Pakistan in successfully stimulating the housing and construction finance in the country, which was hitherto a neglected area within the commercial banks.

Prime Minister Khan expressed the strong resolve of the government to accelerate activity in this area and encouraged the banks to continue to support this area of economic activity, especially to facilitate customers interested in availing the government’s markup subsidy scheme for housing.

In July 2020, the State Bank of Pakistan, in line with the government’s vision to promote the housing and construction sector activities and improve home ownership in the country, had mandated the banks to increase their housing and construction finance portfolio to at least 5 per cent of their private sector advances by December 2021.

Accordingly, the central bank set quarterly targets with the mutual consent of the presidents and CEOs of banks supported by an incentive and penalty framework to motivate the banks to achieve these goals.

Baqir also shared that in addition to strong growth in the construction and housing finance, the banks have started to extend housing finance under the government’s markup subsidy scheme, commonly known as Mera Pakistan Mera Ghar (MPMG), for the low- to middle-income segments of the society.

The provision of housing finance to such segments of the society is also unprecedented in Pakistan’s history. In April 2021, the banks were given separate targets under Mera Pakistan Mera Ghar to induce them to grow this segment of the housing finance.

Consequently, the number of applications increased significantly and the amount of loans applied for more than doubled in the last quarter of FY21 to Rs111 billion. As of June 30, 2021, the banks have approved home financing worth Rs39 billion.

The SBP governor also informed the prime minister that following his instructions to facilitate the public as much as possible, a simple one page application form has been designed separately for the salaried persons, businessmen and applicants with informal income to apply for such housing finance.

To facilitate applicants with informal income, some very basic personal information, and payment information about house rent, utilities and children education will be required, he said, adding that the forms will be available both in English and Urdu by the end of July 2021.

While appreciating the SBP efforts to bring ease for the borrowers through simple application form and processes, Prime Minister Imran Khan expressed his expectation that the banks’ portfolio must show strong growth in the disbursements in the coming days.

To facilitate access to home finance, especially within the lower- and middle-income groups, the State Bank’s key initiatives included allowing acceptance of the third party guarantee during the construction period, waiver of the Debt Burden Ratio (DBR) in case of informal income, and the introduction of standard facility offer letter by the banks.

The central bank has also advised the banks to develop and deploy income estimation models for the borrowers with informal sources of income.

In addition to gauge readiness, knowledge and appropriate behaviour of the banking staff towards Mera Pakistan Mera Ghar customers, regular mystery shopping of banking branches on a pan Pakistan basis is conducted by the State Bank of Pakistan.

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