Banks’ housing finance sharply rises 85% in 2021

KARACHI: Bank financing for housing and construction sharply increased 85 per cent, or Rs163 billion, to Rs355 billion in the financial year 2021, the State Bank of Pakistan (SBP) reported on Thursday.

The total outstanding credit of banks for housing and construction stood at Rs192 billion in the preceding year.

Within the housing and construction portfolio, disbursements under the government markup subsidy scheme, also known as Mera Pakistan Mera Ghar (MPMG), increased Rs38 billion, it said.

The financing to housing and construction, particularly under MPMG has witnessed an impressive growth on the back of many enabling regulatory environments introduced after extensive consultation with the stakeholders.

Further, the SBP also advised the banks to increase their housing and construction finance portfolios to at least 5 per cent of their domestic private sector advances till December 2021, introducing a set of incentives and penalties to ensure compliance.

In the significant growth of housing and construction finance, Habib Bank Limited, Meezan Bank Limited and Bank Al-Habib Limited were the top three contributors.

The banks also made significant progress in the provision of financing under the MPMG scheme, introduced in 2020.

The financing under MPMG picked up momentum in 2021, as approvals for financing by the banks grew from near zero to Rs117 billion in 2021. The banks have received requests of financing of Rs276 billion from potential customers, which indicates that approvals and disbursements will keep growing in the coming months.

Bank Alfalah emerged as the leading bank with highest disbursements of Rs3.3 billion; followed by nine banks with disbursements of over Rs2 billion each.

These include Meezan Bank Limited, Bank Islami Pakistan, National Bank of Pakistan, Standard Chartered Bank, United Bank Limited, MCB Bank Limited, Bank of Punjab, Habib Bank Limited and the House Building Finance Corporation Limited.

The central bank has taken a number of measures to create an enabling regulatory environment for the banks to increase flow of financing to the housing sector.

The key initiatives included allowing acceptance of third party guarantee during the construction period, waiver of debt burden ratio (DBR) in case of informal income and the introduction of standard facility offer letters by the banks.

The State Bank has also advised the banks to develop and deploy income estimation models for borrowers with informal sources of income. In addition to gauge readiness, knowledge and appropriate behaviour of banking staff towards MPMG customers, the State Bank is conducting regular mystery shopping surveys of bank branches across the country.

In line with the State Bank of Pakistan initiatives, the banks have standardised and simplified loan application forms.

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