KARACHI: State Bank of Pakistan had announced the markup subsidy for the construction and purchase of new affordable housing finance.
This facility will allow all individuals, who will be constructing or buying a new house for the first time, to avail bank financing at subsidised and affordable markup rates. This facility will be provided with the administrative support of the central bank and Naya Pakistan Housing and Development Authority (NAPHDA).
The government has allocated Rs33 billion for payment of markup subsidy for financing over a period of ten years and has assured continuity of the facility. The markup subsidy facility will be available through all banks and is divided into three tiers.
Financing under Tier I is available for purchase of houses/apartments/flats of up to 5 marlas or 125 sq. yards with a covered area of 850 sq. feet and maximum price of Rs3.5 million under NAPHDA projects.
The maximum financing under this tier is Rs2.7 million with a maximum tenure of up to 20 years. Banks will charge the markup rate of KIBOR plus 250 basis points. However, GOP will provide markup subsidy to reduce the borrowers’ rate to 5 percent for the first five years and 7 percent for next five years.
KIBOR is the Karachi Interbank Offer Rate that is determined in the interbank market on a daily basis and is used as a benchmark for most of the retail lending by banks.
Financing under Tier II is also for houses/apartments/flats up to 5 marla or 125 sq. yards with a covered area of 850 sq. feet and maximum price of Rs3.5 million. The maximum financing under this tier is Rs3 million for twenty years. This tier facilitates the construction or purchase of housing units by individuals and households who have not applied or qualified for NAPHDA projects.
Banks will charge maximum markup rate of KIBOR plus 400 basis points. The subsidised rate for borrowers for the first ten years under Tier II is the same as that of Tier I.
The third tier of the facility promotes affordable housing for middle-income families. This tier allows subsidized financing for construction or purchase of houses/apartments/flats of more than 5 marlas (125 sq. yards) and up to ten marlas (250 sq. yards) with maximum covered area from 850 sq. feet to 1,100 sq. feet and maximum price of Rs6 million.
The maximum financing under this tier is Rs5 million for up to twenty years. Banks will charge a maximum markup rate of KIBOR plus 400 basis points. The government will provide a markup subsidy to reduce borrowers’ rate to 7 percent for the first five years and 9 percent for the next five years.
