By Abdul Wajid Khan ISLAMABAD, Feb 04 (INP-WealthPK): Increase in banks’ lending to the housing and construction sectors will not only benefit low-income segment of the society to construct houses, but also give boost to economy, said an official of Naya Pakistan Housing and Development Authority (NAPHDA). The official told INP-WealthPK that increase in banks credit to the housing sector is a good sign and it will help the low-income segment of the society to build houses. He added that increase in housing finance will boost economy by generating massive economic activities in the country. “Under the scheme, the government is providing subsidy on markups and deserving people can have subsidised house loan facility. The government has targeted low segment of the society, and cases are approved after strict verification by relevant authorities to ensure transparency and only deserving applicants are being given priority. Selected applicants will bear only 3 percent markup for the first five years, while other costs will be borne by the government,” said the official. Under the MPMG (Mera Pakistan Mera Ghar) scheme, financing under tier-1 is available through banks under the NAPHDA projects, while financing under tier-2 and tier-3 is available through banks for financing of housing units/apartments/flats under non-NAPHDA projects. The official said that although the department faces certain issues in implementation of projects, including land acquisition, which is a difficult process, work on different ongoing projects under the NAPHDA is smoothly underway. Under the scheme, ongoing projects will be completed in two years. According to the latest report of the State Bank of Pakistan (SBP), housing and construction finance increased by record Rs163 billion in calendar year (CY21) including Rs38 billion under the prime minister’s low-cost housing scheme, commonly known as MPMG. The MPMG scheme was introduced to boost the housing sector by extending cheaper loans to low-income families for the construction of their homes. “Recording an unprecedented growth of 85 percent, the banks’ outstanding credit for housing and construction increased by Rs163 billion, from Rs192 billion to Rs355 billion, in 2021. Within the housing and construction portfolio, disbursements under the government markup subsidy scheme increased by Rs38 billion,” the report added. According to the latest figures provided by the NAPHDA, currently, around 45,000 low-cost housing units are under construction across the country under the authority. The private sector has submitted 317 proposals to the authority for construction of more than three million housing units. The SBP report further highlighted that financing to housing and construction particularly under the MPMG has witnessed impressive growth on the back of many enabling regulatory environments introduced after extensive consultation with stakeholders. Further, the SBP also advised the banks to increase their housing and construction finance portfolios to at least 5 percent of their domestic private sector advances till December 2021, introducing a set of incentives and penalties to ensure compliance. Financing under the MPMG picked up momentum in 2021 as approvals for financing by banks grew from near zero to Rs117 billion in 2021. The banks have received requests of financing of Rs276 billion from potential customers, which indicates that approvals and disbursements will keep growing in coming months. The SBP has taken a number of steps to create an enabling regulatory environment for banks to increase flow of financing to the housing sector. 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. Potential in housing sector Pakistan is a country of around 220 million people with strong economic growth potential. Pakistan’s high population growth rate fuels urbanisation and with it comes high demand for housing from almost every stratum of society. As per Pakistan Economic Survey for FY21, the construction sector contributed 2.5 percent to the gross domestic product (GDP) and 7.71 percent of the employed Pakistani labour force is engaged in construction sector. There is an estimated shortage of 12 million residential units in the country and most of it is in low and middle-income groups. In these circumstances, the construction industry is considered as one of the engines of long-term economic growth. There are at least 40 other industries closely tied with the construction industry and 70 percent of unskilled labour market is also linked with this sector. Analysts believe that smooth implementation of the MPMG scheme will create massive benefits for the low income and underprivileged segments of the society to fulfil their housing needs. The SBP has taken a timely step to direct banks to increase financing to the housing and construction sectors. Although measures taken by the SBP are yielding good results, the private sector banks still need to accelerate disbursements under the scheme and fast-track the approval process on loan applications because provision of swift and affordable financing to the low-income class will lead the country to inclusive development.