Govt Doubles the Limit for Subsidized Loans: You Can Now Borrow Rs10 Million to Finance Your House

The government has doubled the amount you can borrow under the central bank’s markup subsidy for housing finance scheme, allowing you to borrow up to Rs10 million to finance a house of 125 to 250 square yards (5 to 10 marla) or an apartment with a covered area of 2,000 square feet.

The government has also doubled the limit for smaller houses, 125 square yards or apartments with a covered area of 1,250 square feet, to Rs6 million and removed price caps in both these categories.

It even slashed the markup rate to 3% for housing units that fall in projects approved by the Naya Pakistan Housing Development Authority, making it the most affordable among all categories.

“In its effort to promote low cost and affordable homeownership among low to middle-income groups, the Government of Pakistan has revised its markup subsidy scheme of housing finance significantly to align with the prevailing housing market dynamics,” the State Bank of Pakistan said on Thursday.

Announced in October 2020, the SBP’s markup subsidy scheme is part of the government’s signature project, the Naya Pakistan Housing Program, that offers subsidised house loans.

The programme faced severe criticism for it remained largely out of the reach of the low- and middle-income segments because of certain restrictions, especially caps on price and loan limits.

There were complaints from the low-income segments that the banks were reluctant to accept their applications. As a result, the SBP has made several key revisions to the original scheme.

“In order to expand the outreach of the scheme and allow many more households to benefit, the GoP on the recommendation of stakeholders approved significant revisions in the key parameters of the scheme,” the SBP said.

Following are the major changes to the original scheme.

  1. Previously, the scheme had divided the potential borrowers into three tiers. Now a new tier called Tier 0 has been added to facilitate the participation of microfinance banks, which specialise in financing to the low-income segment. The loan limit for this tier is Rs2 million.
  2. The markup rate under Tier 1 (NAPHDA projects) has been lowered to 3% for the first five years and 5% for the next 5 years. Earlier these rates were 5% and 7% respectively. 
  3. Under Tier 2 and Tier 3, the requirement of a maximum one-year-old housing unit has been waived till March 31, 2023. Further, restrictions on the first transfer of housing units and the maximum value of housing units have also been removed. Maximum covered area for flats and apartments has been increased whereas, covered area restriction has been removed in case of land-based housing units. The maximum allowed financing has also been doubled from Rs3 million to Rs6 million under Tier 2 and from Rs5 million to Rs10 million under Tier 3. It may be noted that Tier 2 is for houses of up to 5 marla and apartments with a covered area of up to 1,250 sq. feet under non-NAPHDA projects and Tier 3 is for houses of up to 10 marla and apartments with a covered area of up to 2,000 sq. feet under non-NAPHDA projects. 
  4. In addition, the minimum eligible tenor of housing finance under the scheme has been lowered to 5 years from the existing 10 years.

With changes in the key parameters of the scheme, the government has increased the total funding allocation to Rs36 billion on account of markup subsidy payment for financing over a period of 10 years and has assured continuity of the facility, the SBP said. This translates to an addition of Rs3 billion to the previous amount.

After the changes, the scheme looks like this:

housing finance scheme

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