Pakistan approves scheme for affordable housing finance

Pakistan's apex economic decision making body — the Economic Coordination Committee (ECC) — has approved a markup subsidy and risk-sharing scheme for affordable housing finance.

During the ECC meeting held under Finance Minister Muhammad Aurangzeb's chairmanship on Friday, the Ministry of Housing & Works presented a summary related to affordable housing finance.

Under the scheme, the government will enable first-time house and flat owners to avail housing finance spanning up to 20 years at a subsidised fixed rate for the first 10 years and market rate for the next 10 years. However, there will be 10% risk coverage of the outstanding portfolios of financial institutions under the scheme on first loss basis.

The maximum loan will be up to PKR 2 million under Tier 1 and up to PKR 3.5 million under Tier-II. However, the bank pricing will be for one year KIBOR plus 3%. There will be no processing cost and no prepayment penalty.

The size of the housing unit will be up to five marla or flat of up to 1,360 sq. ft area. The participating financial institutions will be all commercial banks, Islamic banks, MFBs and HBFCL.

The ministry sought the ECC's approval to allow disbursement of PKR 100 billion for financing of 50,000 housing units.

The Committee urged the ministry to develop a comprehensive, integrated database of the housing sector in coordination with relevant federal and provincial stakeholders, in order to ensure better targeting and effective implementation of the scheme.

In a major step towards environmental sustainability, the ECC also approved Pakistan’s Green Taxonomy, as proposed by the Ministry of Climate Change and Environmental Coordination.

To support skills development through outcomes-based financing, the ECC approved a government guarantee of PKR 1 billion for the issuance of the Pakistan Skill Impact Bond (PSIB), as moved by the Ministry of Federal Education and Professional Training.

The Committee encouraged the Ministry to gradually move towards adopting the public-private partnership model and to explore undertaking similar initiatives using its own balance sheet, thereby reducing reliance on sovereign guarantees.

The ECC approved a proposal by the Ministry of Information Technology and Telecommunication for the revision of charges for Radio-Based Services (RBS). The Committee directed the ministry to ensure periodic revision of RBS charges every three to five years, aligned with ongoing economic changes and technological advancements in the sector.

The Committee also endorsed a revised composition of the advisory committee overseeing the release of IMT spectrum, which is critical for improving next-generation mobile broadband services in Pakistan.