Circulars/Notifications / Infrastructure, Housing & SME Finance Department

IH&SMEFD Circular No. 11 of 2020 October 12, 2020

The Presidents/ Chief Executives

All Banks/DFI

Dear Sir(s)/Madam(s),

Markup Subsidy for Housing Finance

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

2. In order to provide formal financial services at affordable rates, Government of Pakistan is providing Markup Subsidy for
Housing Finance. The key features of the facility approved by the Government are given below:

Particulars Markup Subsidy Program

Eligibility Criteria i. All men/women holding CNIC

ii. First time home owner
iii. One individual can have subsidized house loan facility under this scheme only once
iv. Only for construction and first purchase of newly constructed affordable housing units

Size of Housing Size of the loan is segregated into three tiers, as under:
Unit
i. Tier 1 (T1) - Housing Units/apartments of up to 125 square yards (upto 5 Marla) with covered
area of up to 850 square feet. (NAPHDA)
ii. Tier 2 (T2) - Housing Units/apartments of up to 125 square yards (5 Marla) with covered area of
up to 850 square feet.
iii. Tier 3 (T3) - Housing Units of more than 125 square yards up to 250 square yards (10 Marla) or
apartments with covered area from more than 850 square feet to 1,100 square feet.

Maximum Price Maximum Price (Market Value) of a single housing unit at the time of approval of financing, as under:
of Housing Units
Tier 1 (T1) - Rs 3.5 million
Tier 2 (T2) - Rs 3.5 million
Tier 3 (T3) - Rs. 6.0 million

Maximum Loan Maximum size of the loan of a single housing unit, as under:
size
Tier 1 (T1) - Rs 2.7 million
Tier 2 (T2) - Rs 3.0 million
Tier 3 (T3) - Rs. 5.0 million
Loan type Long term housing finance loans

Loan Tenor 10/15/20 years, depending upon choice of customers.

Security As per banks’ credit policy and prudential regulations for housing finance, the housing unit financed will
Requirements be mortgaged in favor of financing bank.
Allocation in Finance Division shall give authority to SBP to debit GOP account on quarterly basis for the subsidy
Budget payment to banks.

Payment will be made to the banks on submission of quarterly-consolidated subsidy statement as per
format prescribed by State Bank of Pakistan.
Pricing for Housing Loans:
Pricing
Loan Tiers Customer Pricing Bank Pricing
5% for first 5 years &
Tier 1 KIBOR+250 BPS
7% for next 5 years
5% for first 5 years &
Tier 2
7% for next 5 years KIBOR+400 BPS
7% for first 5 years & (Spread may vary)
Tier 3
9% for next 5 years
For loan tenors exceeding 10 years, market rate will be applicable for
the period exceeding 10 years.

Executing All commercial banks including Islamic banks and House Building Finance Company Limited (HBFCL)
Agency
Application Form A standardized Application Form both in English and Urdu will require minimum essential
information with simple format.
 The processing time will not exceed 30 days after submission of all documents by the borrower
and the same will be clearly stated in the application form.

Standardized Banks to have standardized loan documents and risk acceptance criteria.
Procedures
Monitoring SBP will publish consolidated information about the loans extended under this program for information
of the public on quarterly basis on its website.
Geographical Whole of Pakistan.
distribution

3. Banks can also avail risk coverage against the housing finance under the scheme from Pakistan Mortgage Refinance Company
(PMRC) at mutually agreeable terms and conditions.

4. The banks are advised to ensure successful implementation of this facility through dissemination of necessary instructions to
branches/ regions and capacity building of field staff, development/alignment of financing products and marketing campaigns, etc.

5. Please acknowledge the receipt.

Yours sincerely,

Sd/-

(Dr. Mian Farooq Haq)

Director

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