Housing and Construction Finance Jumps by 75% in FY21


Banks continued to enhance their financing for the housing and construction sector to meet their targets which witnessed steady progress to reach nearly Rs. 260 billion by the end of the financial year 2020-21.

According to the State Bank of Pakistan (SBP), the housing and construction finance increased by Rs. 111 billion or 75 percent over FY20, reaching Rs. 259 billion by the end of June 2021.

An increase of this quantum in housing and construction finance in one year is unprecedented in Pakistan’s history. Consequently, 97 percent of the overall target set by SBP for June 30, 2021, was met.


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Dr. Reza Baqir presented information on unprecedented growth in housing and construction finance to the chair Prime Minister recently in a meeting of the National Coordination Committee on Housing, Construction, and Development (NCCHCD).

The meeting was attended by the Federal Ministers for Finance, Information, Aviation, and Climate Change, Chairman NAPHDA, State Minister for Information & Broadcasting, SAPM on Political Communication, Presidents/CEOs of banks, and senior SBP officials.

The Prime Minister appreciated that the efforts of the State Bank of Pakistan have been successful in stimulating the housing and construction finance in the country, which was hitherto a neglected area within commercial banks.

The Prime Minister expressed the strong resolve of the government to accelerate activity in this area and encouraged banks to continue to support this area of economic activity and especially to facilitate customers interested in availing the government’s mark-up subsidy scheme for housing.

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In July 2020, the State Bank, in line with Government’s vision to promote the housing & construction sector activities and improve homeownership in the country, mandated banks to increase their housing and construction finance portfolio to at least 5 percent of their private-sector advances by December 2021.

Accordingly, the SBP set quarterly targets with the mutual consent of Presidents/CEOs of banks supported by an incentive and penalty framework to motivate banks to achieve these goals.

In April 2021, banks were given separate targets under MPMG to induce them to grow this segment of housing finance.  Consequently, the number of applications increased significantly, and the number of loans applied for more than doubled in the last quarter of FY21 to Rs. 111 billion.  As of June 30, 2021, banks have approved home financing worth Rs. 39 billion.

To facilitate applicants with informal income, some very basic personal information and payment information about house rent, utilities & children’s education will be required. Forms will be available both in English and Urdu by the end of July 2021.

To facilitate access to home finance, especially within lower and middle-income groups, State Bank’s key initiatives include allowing acceptance of third party guarantee during the construction period, waiver of Debt Burden Ratio (DBR) in case of informal income, and the introduction of standard facility offer letter by the banks.



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The SBP has also advised banks to develop and deploy income estimation models for borrowers with informal sources of income. In addition to gauging the readiness, knowledge, and appropriate behavior of banking staff towards MPMG customers, regular mystery shopping of banking branches on a pan-Pakistan basis is conducted by the central bank.

In addition to State Bank’s dedicated online portal for the registration of complaints by MPMG customers, commercial banks have also established a 24/7 joint helpline to address the queries of the general public regarding MPMG.

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