The State Bank of Pakistan (SBP) has announced five regulatory relaxations to incentivise banks to finance low-cost and affordable housing.
The move comes amid the central bank’s efforts to provide an enabling regulatory environment to promote housing and construction finance.
To support the provision of finance to this sector, the definition of low-cost housing finance used in current regulations for banks has been aligned with the definition used under the government mark-up subsidy facility for housing finance eligible under tiers one and two of housing finance.
Specifically, in the SBP regulations, the value of housing unit has been increased from Rs3 million to Rs3.5 million with maximum loan size increased from Rs2.7 million to Rs3.15 million.
Consequently, the incentive for low-cost housing finance will increase for banks as they will not only be able to enjoy mark-up subsidy facility of the government but also the regulatory incentives under low-cost housing finance of the SBP.
In order to facilitate financing for this segment, the SBP is urging banks to use alternative methods to identify income sources and assess creditworthiness of the borrower.