Banks’ housing and construction finance portfolio has surged to Rs. 202 billion in March 2021 mainly due to the policy of the government and banking regulator to promote housing finance through low-cost housing scheme, according to the data revealed by the State Bank of Pakistan (SBP).
The housing finance from banks surged to a maximum level of Rs. 103 billion from the last many decades. The financing surged to Rs. 148 billion till June 2020 and then surged to Rs. 202 billion by mid of March 2021.
Overall financing to the housing and construction sector by banks is likely to increase further significantly as mortgage finance activity under Mera Pakistan Mera Ghar Scheme is picking up pace. As of April 20, 2021, banks have received applications for financing of more than Rs. 52 billion from the general public under this scheme. Of these, the banks have approved financing of more than Rs.15 billion to the applicants while the remaining applications are at different stages of the evaluation and approval process.
Housing and construction finance has been progressing significantly over the period of one and half years after the government, banking regulators and banks have introduced low-cost housing schemes. State Bank of Pakistan (SBP) set a 5% mandatory credit target for banks on overall loan or financial portfolio besides the government had committed to provide a subsidy of Rs. 36 billion along with various planned schemes.
Keeping in view the need to improve housing in the country and the important role of the construction sector in boosting economic activities in the countries, the Government of Pakistan envisions to increase the number of housing units manifold in coming years and has taken several measures in this regard.
SBP and PBA Gear Up Effort To Promote Mera a Pakistan Mera Ghar Scheme
To support the vision of the Government of Pakistan, the State Bank of Pakistan has taken several measures since July 2020 to support the provision of financing for the housing and construction sector by way of giving incentives and targets to the banks.
The State Bank of Pakistan has been actively engaged with banks to ensure that a vast majority of the masses could benefit from the Mera Pakistan Mera Pakistan Housing Finance Scheme. For this purpose, SBP with the help of the Pakistan Banks’ Association (PBA) and banks in ensuring that process of applying for housing finance is easy for the masses and in case they face any difficulty or have complaints, help is provided to them promptly and complaints are resolved in a timely manner.
To begin with, commercial Banks have designated 50% of their branches, around 7,700, across the country for accepting applications under Mera Pakistan Mera Ghar Housing Finance Scheme. In addition, all the remaining branches will also provide basic information about the scheme and refer applicants to the designated branches.
Banks are regularly advertising the features of the scheme to attract and encourage potential customers. In order to address complaints, the State Bank has established a comprehensive complaint resolution mechanism which comprises of an internet portal supported by a network of State Bank and commercial bank staff.
The IT portal is live for the registration of complaints by applicants who face any difficulty in obtaining loans. State Bank has also established help desks in its 16 offices across the country to facilitate applicants in the registration of their complaints through the IT portal. These help desks address access challenges of applicants, especially from low-income strata, arising out of potential language and technology barriers.
The Pakistan Banks’ Association (PBA) is also playing a very active role in the promotion of the Mera Ghar Mera Pakistan Housing Finance Scheme. It is very close to establishing a single call center to address applicant’s questions and to guide them towards their nearest branches to submit applications for home loans. A significant number of Pakistanis who currently do not own a house and are eligible for financing under the Mera Pakistan Mera Ghar Scheme face difficulties in providing documentary evidence of regular sources of income to prove their ability to repay.
To address this issue, the State Bank is coordinating with banks to develop a mechanism whereby income proxies, based on demonstrated expenses like rent payments or utility bills, could be used for credit evaluation and income assessment. PBA is engaged with internationally renowned experts to develop scoring models in this regard in the coming months. The State Bank is facilitating banks to get data from mobile phone companies, utility providers and other government agencies to run these credit scoring models.
Banks have already developed an initial judgmental income proxy model to accommodate applicants with informal incomes till the time expert’s developed scoring models are implemented..