Banks receive applications worth Rs200 billion for low-cost housing finance

KARACHI: The commercial banks have received applications worth Rs200 billion for the low-cost housing financing under Mera Pakistan Mera Ghar (MPMG) Scheme.

The State Bank of Pakistan (SBP) said that as per the latest numbers of October 18, 2021, the banks have received applications of more than Rs200 billion. The banks have approved financing of Rs78 billion, of which Rs18 billion had already been disbursed.

SBP Governor Dr Reza Baqir appreciated the progress made by the banking industry in supporting the low-cost housing finance for first time home owners under the Mera Pakistan Mera Ghar.

At the same time, the SBP governor stressed the need to accelerate the pace of approvals by the banks to match the requests for financing and to ensure that the people are not discouraged by the processing time.

He expressed the hope that with the combined efforts of all the stakeholders, the dream of Pakistanis to have their own homes can become a reality.

Appreciating the efforts to-date, Governor Baqir also asked the stakeholders to increase outreach of the government’s markup subsidy scheme for housing finance, commonly known as Mera Pakistan Mera Ghar (MPMG) to the wider public.

He said when the journey of MPMG started last year, the low-cost housing finance was almost non-existent, as commercial banks rarely ventured in this area fearing its inherent risks.

However, the strong commitment of the government especially, Naya Pakistan Housing and Development Authority (NAPHDA), the SBP, banks and other stakeholders to promote housing and construction activities in the country is beginning to result in considerable increase in the finance for housing and construction.

To augment this effort, the central bank provided an enabling regulatory environment to promote housing and construction finance.

Resultantly, housing and construction credit of the banks reached Rs305 billion at the end of September 2021, which was Rs166 billion at the end of September last year, showing an increase of Rs139 billion and a year-on-year growth of 84 per cent.

In July 2020, the State Bank of Pakistan advised the commercial banks to increase their lending for housing and construction sectors to at least 5 per cent of their private domestic sector advances by December 2021.

To assist in this, the State Bank advised quarterly targets to each bank after individual consultation, leading to concerted efforts. The focus on this segment increased and for the quarter ended September 30, 2021, the banks have achieved 94 per cent of their assigned targets on a consolidated basis.

During July-September 2021, the banks increased their credit to the housing and construction sector by Rs48 billion from Rs257 billion as of June 30, 2021.

Increase in the credit to housing and construction sector reflects that the banks have realigned their internal policy dimension/strategic focus towards development of housing and construction.

The banks have, in recent months, revamped their systems and procedures, upgraded and streamlined technological platforms, and motivated their banking staff through incentives and trainings.

The banks have also established a joint call centre to address the queries of the general public regarding MPMG, which was recently inaugurated by the SBP governor.

The general public can reach the call centre at 0-33-77-786-786. This call centre will help resolve complaints and assist common persons who would like to borrow under MPMG but face difficulties in completing the requirements of the banks.

Earlier, the State Bank of Pakistan launched a user-friendly online complaint resolution mechanism in January 2021. The complaint resolution mechanism comprises an IT-based portal supported by a comprehensive network of the State Bank and commercial banks staff to take care of the problems being faced by the applicants and resolves complaints within a predefined timeline with proper escalation mechanism.

Some of the other steps taken by the SBP in collaboration with NAPHDA, other government agencies, the banks and stakeholders include a simplified loan application, standard facility offer letter, amendment in the prudential framework, development of standard risk assessment criteria for builders/developers, development of income proxy model and streamlined financing documents.