The Sindh Building Control Authority is stalling the construction of affordable houses under Prime Minister Imran Khan scheme of Naya Pakistan Housing Project in Karachi. Around 60-65 Builders and Developers have so far applied to initiate construction under the federal government’s flagship project. However, the SBCA, which operates under the authority of the Sindh Government, is raising objections on this kind of construction.
It has been three years since the launching of the housing scheme but the people of Karachi are yet to see the fruition of this unprecedented project.
One of the members of the Association of Builders and Developers said, “Mostly the builders and developers in Karachi are waiting for permission from the SBCA. SBCA is not cooperating with builders and developers under this scheme.”
The federal government under Pakistan Tehreek-e Insaf Prime Minister Imran Khan has given a number of incentives to the Pakistani banks to support borrowers for the Naya Pakistan Housing Scheme with the help of the State Bank of Pakistan. Given the Sindh Building Control Authority’s objections, the federal government’s ‘Tax Amnesty’ for builders and developers till June 30, 2021, has also remained fruitless.
During the Fiscal year 2020-21, housing and construction finance outstanding increased by Rs 111 billion or 75% over 2019-20, reaching Rs 259 billion by the end of June 2021. An increase of this quantum in housing and construction finance in one year is unprecedented in Pakistan’s history. As a result, 97 percent of the overall target set by SBP for June 30, 2021, was met.
Prime Minister Khan expressed the strong resolve of the government to accelerate activity in this area and encouraged banks to continue to support this area of economic activity and especially to facilitate customers interested in availing the government’s mark-up subsidy scheme for housing
In July 2020, the State Bank, in line with Government’s vision to promote the housing and construction sector activities and improve homeownership in the country, mandated banks to increase their housing and construction finance portfolio to at least 5 percent of their private-sector advances by December 2021, an SBP official said.
Accordingly, the SBP set quarterly targets with the mutual consent of Presidents/CEOs of banks supported by an incentive and penalty framework to motivate banks to achieve these goals.
Governor SBP, Dr. Reza Baqir, also shared that in addition to strong growth in construction & housing finance, banks have started to extend housing finance under ‘Government Markup Subsidy Scheme’, commonly known as Mera Pakistan Mera Ghar (MPMG), for the low to middle-income segments of the society.
The provision of housing finance to such segments of society is also unprecedented in Pakistan’s history. In April 2021, banks were given separate targets under MPMG to induce them to grow this segment of housing finance. Consequently, the number of applications increased significantly, and the number of loans applied for more than doubled in the last quarter of 2020-21 to Rs 111 billion. As of June 30, 2021, banks have approved home financing worth Rs 39 billion, SBP figures shows.
In a meeting about a month ago, The governor SBP also informed the Prime Minister that following his instructions to facilitate the public as much as possible, a simple one-page application form has been designed separately for salaried persons, businessmen, and applicants with informal income to apply for such housing finance.
In order to facilitate applicants with informal income, some very basic personal information, and payment information about house rent, utilities, and children’s education will be required. Forms will be available both in English and Urdu by the end of July 2021.
While appreciating the SBP’s efforts to bring ‘Ease for Borrowers’ through simple application forms and processes, the Prime Minister voiced the expectation that banks’ portfolios must show strong growth in disbursements in the coming days.
To facilitate access to home finance especially within lower- and middle-income groups, State Bank’s key initiatives include 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 letter by the banks.
State Bank has also advised banks to develop and deploy income estimation models for borrowers with informal sources of income. In addition to gauging the readiness, knowledge, and appropriate behavior of banking staff towards MPMG customers, regular mystery shopping of banking branches on a pan Pakistan basis is conducted by State Bank.
The SBP has decided to impose a penalty on banks if they fail to meet the mandatory targets for the number of houses and disbursement, said a circular issued by the State Bank.
“It has been decided that penalty will be imposed on banks falling short of their Government’s Mark-up Subsidy Scheme (G-MSS) targets with effect from July 31, 2021, on both targets of number of housing units and amount of disbursements,” said the central bank.
The circular said, “the banks are still reluctant to extend loans for the low-income housing projects or houses creating frustration among the government’s top ranks. The government’s prime agenda was to provide 10 million jobs and 5 million low-income houses but after three years, there is no visible sign in this direction. The country is said to be facing a shortfall of 10 million houses.
Earlier, on 15 July 2020, the State Bank announced through a circular that it has decided to set a mandatory target for banks to extend mortgage loans and financing for developers and builders while the banks will be required to increase their housing and construction of building loan portfolios to at least 5 percent of their private sector credit by the end of December 2021. The circular was issued following the government’s Naya Pakistan Housing Scheme to build low-income houses.
In April, the SBP assigned monthly mandatory targets of a number of housing units and amount of disbursements to banks in proportion to share in total banking assets.
