The government has agreed in principle to allow commercial banks to take possession of mortgaged houses in cases of loan default after a cumulative notice period of 90 days, as part of broader efforts to promote housing finance in Pakistan.
The proposal is included in amendments to the Financial Institutions (Recovery of Finances) Ordinance, 2001, which are currently being reviewed by the National Assembly Standing Committee on Finance and Revenue.
Under the proposed framework, banks would be allowed to issue three separate notices of 30 days each to borrowers who fail to make mortgage payments. If outstanding dues remain unpaid after the final notice, financial institutions would be permitted to proceed with the sale of the mortgaged property, provided all legal notice requirements have been fulfilled.
The issue was discussed during a meeting of the Standing Committee on Finance chaired by Syed Naveed Qamar in Islamabad, where lawmakers expressed concerns that the proposed amendments could give banks excessive foreclosure powers at the expense of borrowers.
In its statement after the meeting, the committee said members believed stronger recovery laws were necessary to expand mortgage financing and improve lender confidence, but stressed that borrowers must also be protected from unfair or arbitrary actions.
Following detailed discussions, the committee deferred the bill for further review and directed the Ministry of Housing and Works to circulate a revised draft before the next meeting.
Qamar emphasized that affordable housing finance should genuinely benefit low-income families through transparent and inclusive mechanisms. He also highlighted the need for effective foreclosure laws to strengthen Pakistan’s underdeveloped mortgage financing sector.
During the briefing, officials from the finance, housing, and law ministries provided updates on the Prime Minister Apna Ghar Programme and related housing finance reforms.
Housing Secretary Captain (retd) Mehmood Ahmad told lawmakers that the subsidized housing scheme aims to help low and middle-income households purchase homes while supporting economic activity and the construction sector.
Approved in August 2025 and revised in March 2026, the programme offers financing of up to Rs. 10 million for first-time homebuyers at a fixed markup rate of 5 percent for up to 20 years with a 90:10 financing ratio.
According to officials, the programme had received 25,304 applications by April 30, 2026. Of these, 8,990 applications worth Rs. 37.154 billion had been approved, while Rs. 5.071 billion had been disbursed to 1,845 beneficiaries.
Officials also informed the committee that Pakistan’s housing finance sector remains significantly underdeveloped, with mortgage financing accounting for just 0.3 percent of GDP and 0.56 percent of total private sector credit.
The government has set a target of financing 500,000 housing units over the next four years, requiring an estimated Rs. 3.2 trillion in financing.
Finance Secretary Imdadullah Bosal acknowledged that the government currently lacks the fiscal space to fully fund the target and said financing would need to be arranged through fiscal adjustments and possible revisions to subsidy programmes and development spending.
Government officials argued that reforms to foreclosure and recovery laws are necessary to reduce risks for banks and support long-term growth in mortgage financing.
However, committee members noted that Pakistan’s housing finance ecosystem remains too weak to support such ambitious targets without broader reforms, improved recovery systems, and stronger institutional readiness among banks.
The committee also raised concerns about limited access to housing finance for low-income and underserved communities, particularly in rural areas, and recommended simpler financing procedures, flexible eligibility criteria, and stronger subsidies for vulnerable households.
According to the law ministry, the proposed amendments also include a new Section 15A specifically focused on housing finance and provide borrowers the option to restructure or settle mortgage liabilities before the sale of a property takes place.
