Govt slashes markup rate for Housing Finance scheme

ISLAMABAD: The federal government on Friday approved revisions to certain features of the “Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance,” which aims to promote affordable housing throughout the entire nation.

The Ministry of Housing and Works issued a notification which stated that the Economic Coordination Committee (ECC) approved the changes, which the federal cabinet subsequently confirmed.

The eligibility requirements for the scheme will remain the same according to the new regulations. 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 provides financial support for home buying and house construction, which includes purchasing a plot of land before building a home and constructing a home on an existing owned plot.

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.

The scheme will include financial institutions, which comprise commercial banks, Islamic banks, microfinance banks, and the House Building Finance Company Limited (HBFCL).

The new agreement raises the maximum loan amount to Rs. 10 million, while maintaining the loan period at 20 years. The government will cover the interest expenses during the first decade of the loan.

The bank charges will apply one-year KIBOR plus 3 percent, while end-users will face a fixed markup rate of 5 percent for both tiers.

The Tier-2 borrower rate used to be higher than the current rate. The loan-to-value ratio will remain 90:10, which means that borrowers must provide 10 percent equity while lenders will cover 90 percent of the financing.