End-user subsidized markup further reduced


KARACHI: In order to support the affordable housing projects, the federal government has further reduced the end user subsidized markup rate for housing projects under Naya Pakistan Housing and Development Authority (NAPHDA) and increased the fund allocation for subsidy by Rs 3 billion to Rs 36 billion for next 10-years.

Housing plays an important role in economic development by contributing to GDP growth, employment generation and social wellbeing. Further, more than 40 industries and 70 percent of unskilled labor are linked with the housing and construction sector.

In order to provide formal financial services at affordable rates, the federal government launched the Markup Subsidy Scheme for Housing Finance in October last year. 

According to the State Bank of Pakistan (SBP) in its effort to promote low cost and affordable home ownership among low to middle-income groups, the government has revised its markup subsidy scheme of housing finance significantly to align with the prevailing housing market dynamics.

With changes in the key parameters of the scheme, the federal government has increased the total funding allocation to Rs36 billion on account of markup subsidy payment for financing over a period of 10 years and has assured continuity of the facility. Initially, the government allocated Rs33 billion for payment of markup subsidy for financing over a period of 10 years.

The scheme had divided the potential borrowers into three tiers.  Now a new tier called Tier 0 has been added in the scheme to facilitate participation of microfinance banks (MFBs) under the scheme for disbursement of financing of up to Rs2 million per housing unit.

In view of the fact that MFBs specialize in extension of financing to low-income households, it is believed that participation of MFBs will significantly enhance outreach of scheme to these segments. Under this Tier, MFBs will either use their own funds or banks will lend to MFBs for onward lending to low-income borrowers of housing finance.

The end user subsidized markup rate under Tier 1 for housing units of up to 5 marla and covered area of 850 sq. feet under NAPHDA projects, has been lowered to 3 percent for first five years and 5% for the next 5 years.  Earlier these were 5 percent and 7 percent respectively. This will help to reduce the burden of installments on low-income strata of applicants under NAPHDA projects even more. 

Under Tier 2 and Tier 3 of the scheme, keeping in view the limited supply of eligible housing units especially during the initial years, the requirement of maximum one-year-old housing unit has been waived till March 31, 2023.

Further, restrictions on first transfer of housing unit and maximum value of housing units have also been removed. Maximum covered area for flats and apartments has been increased whereas, covered area restriction has been removed in case of land-based housing units.

The maximum allowed financing has also been doubled from Rs3 million to Rs6 million under Tier 2 and from Rs5 million to Rs10 million under Tier 3. It may be noted that Tier 2 is for houses of up to 5 marla and apartments with covered area of up to 1,250 sq. feet under non-NAPHDA projects and Tier 3 is for houses of up to 10 marla and apartments with covered area of up to 2,000 sq. feet under non-NAPHDA projects.

In addition, the minimum eligible tenor of housing finance under the scheme has been lowered to 5 years from the existing 10 years. This will facilitate individuals desiring to avail shorter term financing. The revised markup subsidy facility will continue to be available through banks across the country.