Banks credit to the housing and construction sector, mainly builders and developers of housing societies, have surged to Rs. 305 billion at the end of September 2021, which was Rs. 166 billion at the end of September last year, showing an increase of Rs. 139 billion and year-on-year growth of 84%.
In July 2020, the State Bank of Pakistan advised commercial banks to increase their lending for housing and construction sectors to at least 5 percent of their private domestic sector advances by December 2021. To assist in this, the State Bank advised quarterly targets to each bank after individual consultation, leading to concerted effort. For the quarter ending September 30, 2021, banks have achieved 94 percent of their assigned targets on a consolidated basis.
During July-September 2021, banks increased their credit to the housing and construction sector by Rs. 48 billion from Rs. 257 billion as of June 30, 2021. An increase in credit to the housing and construction sector reflects that banks have realigned their internal policy dimension/strategic focus towards the development of housing and construction. The banks have, in recent months, revamped their systems and procedures, upgraded and streamlined technological platforms, and motivated their banking staff through incentives and training.
The banks have also established a joint call center to address queries of the general public regarding Mera Pakistan Mera Ghar (MPMG) which was recently inaugurated by the Governor SBP. The general public can reach the call center at 03377786786. This call center will help resolve complaints and assist common persons who would like to borrow under MPMG but face difficulties in completing the requirements of banks.
Earlier, State Bank launched a user-friendly online complaint resolution mechanism in January 2021. The complaint resolution mechanism comprises an IT-based portal supported by a comprehensive network of State Bank and commercial bank staff to take care of problems faced by applicants and resolves complaints within a predefined timeline with a proper escalation mechanism.
Some of the other steps taken by SBP in collaboration with NAPHDA, other government agencies, banks, and stakeholders include a simplified loan application, standard facility offer letter, amendment in the prudential framework, development of standard risk assessment criteria for builders/developers, development of income proxy model and streamlined financing documents.
Speedy Approvals of Financing Under Low-Cost Housing Scheme
The low-cost housing scheme MPMG has continued to attract the interest of a number of citizens as the amount against the applications surged to over Rs. 200 billion, however, the approval of financing stood less than 50 percent whereas the disbursement of stood less than 10 percent so far.
According to the data, the banks have approved an amount of Rs. 78 billion. On the other hand, these companies disbursed merely Rs. 18 billion. Governor SBP, Dr. Reza Baqir, stressed the need to accelerate the pace of approvals by banks to match the requests for financing to ensure that people are not discouraged by the processing time. He expressed the hope that with the combined efforts of all stakeholders, the dream of Pakistanis to have their own homes can become a reality.
While appreciating the efforts to date, Reza Baqir also asked stakeholders to increase the outreach of the Government’s Markup Subsidy Scheme for Housing Finance commonly known as Mera Pakistan MeraGhar to the wider public. He said that when the journey of MPMG started last year, low-cost housing finance was almost non-existent as commercial banks rarely ventured into this area fearing its inherent risks.
However, the strong commitment of the government especially NAPHDA, SBP, banks, and other stakeholders, to promote housing and construction activities in the country, is beginning to result in a considerable increase in finance for housing and construction.
Source: Pro Pakistani