Financing of Low-Cost Housing
Over the past year, the government and the State Bank of Pakistan (SBP) have remained on their toes to remove bottlenecks that surfaced in the process of implementation of PTI's flagship 'Mera Pakistan Mera Garh' (MPMG) project. And it is an ongoing, continuing exercise.
Some features of incentives package offered to buyers, house builders, land developers and construction companies - such as tax amnesty and liberal tax concessions, easier access to bank finance and subsidised credit have been quickly revised and related deadlines extended to remove difficulties faced by the potential stakeholders.
Notwithstanding this dynamic approach, bank lending to targeted borrowers has yet to pick up as expected.
As of April 20, applications from citizens for the financing of more than Rs52 billion have been received by banks under the Mera Pakistan Mera Ghar scheme. Of these, banks have approved financing of over Rs15bn to applicants considered eligible for loans while the remaining cases are stated to be in the different stages of the evaluation and approval process.
So far, risk-averse banks do not seem enthusiastic about achieving the
SBP target of housing and construction finance portfolio, set at 5 per cent of the private sector credit by end of 2021.
Pakistan's mortgage finance to GDP ratio at 0.23pc is abnormally low compared to the South Asian average of 3.4pc Taking notice of the grievances of loan applications received by it, the SBP, on April 30, directed banks and development financial institutions to take appropriate measures to resolve applicants' complaints on a timely basis.
The complaints related to exorbitant housing loan processing fee, unusual delay in loan application processing and the lack of appropriate behaviour of banks' staff with customers. Even the complaints lodged on the SBP's portal remain pending with banks for an unduly long time.
The SBP has asked the banks (a) to rationalise the processing fee for financing, considering their actual costs and (b) to provide applicants with the break-up of these charges at the time of receipt of applications.
By April 30, SBP circular, the banks and depository financial institutions have been directed to set up an online e-tracking mechanism and a phone-based helpline to provide the status and expected time required for the decision on an application on customer's