Govt Reduces Markup Rate for Housing Finance Scheme

The federal government on Friday approved revisions to certain features of the “Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance” aimed at promoting affordable housing across the country.

According to a notification issued by the Ministry of Housing and Works, the revisions were made following a decision by the Economic Coordination Committee (ECC) and its subsequent ratification by the federal cabinet.

Under the revised framework, the eligibility criteria for the scheme will remain unchanged. The facility will continue to be available to first-time homeowners who are Pakistani citizens holding valid CNICs and do not own any housing unit in their name.

The scheme covers financing for the purchase of a house or flat, construction of a house on an already owned plot, as well as the purchase of a plot followed by construction.

The approved housing unit sizes include houses of up to 5 marla and flats or apartments of up to 1,500 square feet, as agreed under the ECC decision.

Financial institutions, including commercial banks, Islamic banks, microfinance banks and the House Building Finance Company Limited (HBFCL), will participate in the scheme.

Under the revised terms, the maximum loan size has been increased to up to Rs. 10 million, while the maximum loan tenor will remain 20 years, with the government providing a markup subsidy for the first 10 years.

Bank pricing will be set at one-year KIBOR plus 3 percent, while the end-user will pay a fixed markup rate of 5 percent for both tiers. Previously, the rate for Tier-2 borrowers was higher.

The loan-to-value ratio will remain 90:10, meaning 90 percent financing through loans and 10 percent borrower equity.

The government will also provide risk coverage of 10 percent of the outstanding portfolio on a first-loss basis under the scheme.

The programme aims to finance 500,000 housing units over four years, including 50,000 units in fiscal year 2025-26, 100,000 units in 2026-27, 150,000 units in 2027-28, and 200,000 units in 2028-29.

The State Bank of Pakistan (SBP) will act as the implementing agency in collaboration with the Pakistan Housing Authority-Foundation and participating financial institutions.

The notification further states that, to ensure uniformity, the interest rate on loans already disbursed at 8 percent will be adjusted to 5 percent.

All relevant stakeholders, including the Ministry of Finance, SBP and participating banks, have been directed to take the necessary steps to implement the revised scheme.

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