The State Bank of Pakistan (SBP) has introduced revised regulations for housing finance, allowing eligible borrowers to access housing loans with a maximum repayment period of 30 years. The updated framework has taken effect immediately and replaces several housing-finance instructions issued between 2019 and 2021.
The revised rules apply to banks and development finance institutions (DFIs), which have been directed to comply with the updated requirements.
Under the new framework, housing finance can be used for a range of purposes, including the purchase of a house, apartment or plot, construction of a home on an owned plot, renovation or expansion of an existing property, and installation of renewable-energy systems such as solar solutions.
However, financing specifically obtained for renewable-energy projects will have a maximum repayment period of 10 years.
SBP Introduces Repayment Capacity Requirements
The revised regulations also set requirements for assessing a borrower’s ability to repay housing finance. Banks and DFIs must obtain the applicant’s latest credit information from the SBP’s Electronic Credit Information Bureau (e-CIB) or a licensed private credit bureau before approving financing.
Under the updated framework, the borrower’s combined monthly payments for the proposed housing loan and other outstanding consumer financing cannot exceed 65 percent of net disposable income.
This requirement is intended to ensure that housing finance remains within the borrower’s repayment capacity.
Property Valuation Rules Updated
The SBP has also introduced different valuation requirements based on the size of the housing loan.
For financing above Rs. 10 million, banks and DFIs must obtain a property valuation from at least one valuator approved by the Pakistan Banks’ Association (PBA).
For financing of up to Rs. 10 million, lenders may use an internal valuation in accordance with the applicable requirements.
Mortgage and Security Requirements
Properties purchased or constructed through housing finance will generally be required to be mortgaged in favour of the lending bank or DFI.
For housing finance of up to Rs. 5 million, lenders may accept a lien over the property as security where it is supported by a Green Property Certificate or an equivalent document issued by the relevant authority.
Insurance and Takaful Coverage Required
The revised framework also requires financed residential properties to have comprehensive insurance or Takaful coverage equal to the outstanding housing-finance amount.
Banks and DFIs must provide borrowers with clear information about the coverage, applicable premiums, and other related charges before financing is provided.
The revised regulations represent an updated framework for housing finance in Pakistan, covering loan tenure, repayment capacity, property valuation, security requirements, and insurance arrangements.
