Karachi: The State Bank of Pakistan (SBP) on Thursday (September 2) issued new guidelines that will allow the owners to get home loans for under-construction housing units to promote the growth of the housing and construction sector, according to news sources.
Reportedly, SBP stated that banks were hesitant to provide such financing options to buyers, which limits their options to complete the projects. It was reported that the new SBP guideline provides a comprehensive framework with risk mitigation aspects for the banking sector to promote housing financing.
Sharing more details, it was disclosed that the financing risk of the banks will be eliminated by mortgage of project land, depending on the arrangements with the builders. Moreover, the payments to builders will be made through an account specifically created for it (known as an escrow account). The seller will not have direct access to the account until the construction milestones are achieved, which are decided by the banks and builders.
Additionally, the SBP stated that the owners of housing units, who have availed home loans, which will enjoy several benefits. Firstly, the buyers will get housing units in under-construction projects, which are comparatively low-priced than fully constructed ones. Secondly, the oversight and monitoring by the banks will ensure timely completion and the possession will be transferred to the buyers while the housing units are new. Lastly, the buyers will not have to incur high renovation or maintenance costs for a few years.
SBP mentioned that these benefits will create incentives for buying under-construction homes and create demand for the construction industry.
It is pertinent to mention that the current practice is that the builders of the project permit the owners to make periodic payments when the construction starts and issue allotment letters. However, banks do not grant home loans against allotment letters. As a result, the owners do not have the opportunity to avail of home loans and buy affordable housing units. Besides this, the builders complain about not having the housing finance option, which decreases demand and slows down the development of new projects. SPB believes with these new guidelines, such issues will be resolved.
Iqra holds BS in International Relations and is passionate about writing engaging content on trending real estate topics. When not working, she is either spending time with family, shopping, or discussing shows & movies.
