SBP facilitates financing for homes under construction

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KARACHI: The State Bank of Pakistan (SBP) has further relaxed rules on housing finance, allowing individual buyers to obtain loans for housing units in projects under development.

“To further facilitate buyers of housing units in projects under construction, the requirement for builders/developers to obtain mortgage lending will be relaxed,” the central bank said in a statement.

The notice added, “Accordingly, development home buyers may obtain housing financing for their units under the program if the builder or developer has not obtained mortgage lending.”

In such cases, the builder or developer would be required by agreement to levy mortgage debt on the project’s land in favor of the bank or development finance institution (DFI). “The levy will only be cleared after the project has been completed and the residential units have been handed over to the buyers,” it said.

Any bank or development finance institution can provide housing finance to a buyer of a housing unit in projects under development.

However, if the buyer wishes to obtain financing from a non-mortgage bank or DFI, they would need to obtain a no-objection (NOC) from the mortgage bank/DFI.

In addition, the bank/FDI financing such buyers would also need to enter into a bilateral agreement with the mortgage bank/FDI to hedge their risk.

Regarding the Informed Approval requirement, “It is clarified that the builder/developer is responsible for arranging written approval from clients who intend to purchase units from their own sources without using mortgage financing.”

Earlier, the central bank ordered commercial banks to raise the minimum home loan amount to 7% of their total disbursements to the private sector in 2022. Previously, banks had 18 months to pay out a total of 5% for the period ended December 31, 2021.

Banks approved a total of Rs.355 billion in 2021, including Rs.38 billion for low-cost housing schemes. It is estimated that there is a shortage of about 12 million housing units in Pakistan as demand for housing remains high compared to supply.

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