Key points
- State Bank of Pakistan launches subsidised housing loans
- Low and middle-income buyers eligible
- Initiative aims to spur construction
ISLAMABAD: Pakistan’s central bank has launched a government-backed initiative to expand access to home ownership, in a bid to stimulate the country’s sluggish real estate sector and create momentum in construction and allied industries.
The “Mera Ghar – Mera Ashiana” scheme, introduced through State Bank of Pakistan (SBP), provides first-time homeowners with subsidised loans of up to Rs3.5 million (around $12,600) on a 20-year tenor, with the government subsidising the markup for the first 10 years.
Eligible uses include the purchase of a house or flat, construction on an owned plot, or buying land with the intention of building.
To ensure affordability, end-user pricing has been fixed at 5 per cent for loans up to Rs2 million and 8 per cent for loans up to Rs3.5 million, against a bank cost of one-year KIBOR plus 3 per cent.
Borrowers must contribute 10 per cent equity.
However, no processing fees or prepayment penalties will apply. The scheme also includes a 10 per cent first-loss guarantee from the government to participating banks.
All commercial banks, Islamic banks, microfinance banks, and the House Building Finance Company Limited (HBFCL) have been directed to participate, with SBP urging them to actively disseminate the facility and strengthen internal systems to prevent misuse.
Reviving a sector in decline
The programme is aiming to address Pakistan’s chronic shortage of affordable housing finance. With mortgage lending below the 1 per cent of GDP mark, Pakistan lags behind its regional peers, such as India (9 per cent) and Bangladesh (3 per cent).
Analysts say the subsidised scheme directly targets the affordability gap that has excluded much of the lower-middle class from formal mortgage markets.
Economists argue that increased housing demand could catalyse the wider real estate and construction sectors, which have suffered over the past decade due to high borrowing costs, weak household incomes and a clampdown on speculative investments.
Developers note that renewed end-user demand can trigger project launches in affordable housing, generate employment, and create downstream opportunities in the cement, steel, and other construction materials.
Foreign investment linkages
While the scheme itself is designed for domestic end-users, a revival of Pakistan’s real estate and construction sector is also expected to align with anticipated foreign investments. Recent agreements with China, Saudi Arabia and the United States include commitments in infrastructure, construction, and energy projects, which economists say could indirectly lift real estate values and attract new capital into urban housing markets.
“Foreign investment in infrastructure and construction creates multiplier effects in property development. If mortgage uptake rises domestically, the sector becomes more investable for global capital,” according to reports in the local media
Outlook
Observers caution that the scheme’s success will depend on the robust implementation by banks, clear communication to target groups, and macroeconomic stability. Inflation, interest rate trends, and currency performance will be crucial to sustaining affordable repayments.
Still, policymakers view the programme as a long-awaited step to bring low- and middle-income households into the housing market, while potentially laying the groundwork for a broader revival of Pakistan’s real estate sector in tandem with committed foreign investment in construction and infrastructure.
