ISLAMABAD: The State Bank of Pakistan (SBP) has issued a revised regulatory framework for housing finance, allowing banks and development finance institutions (DFIs) to finance up to 90 percent of a property’s value, up from previous limits under earlier circulars. The new regulations, which took effect immediately upon issuance, supersede several circulars issued between 2019 and 2021, and the central bank has directed all banks and DFIs to ensure strict compliance.
Under the updated rules, the maximum loan-to-value ratio has been set at 90:10, meaning eligible borrowers can secure financing covering up to 90 percent of a property’s assessed value.
Housing finance may be extended for a range of purposes, including purchasing a house, apartment, or plot; constructing on an already-owned plot; renovating or expanding an existing home; and installing renewable energy systems within housing units.
The maximum repayment tenor for standard housing finance is fixed at 30 years, while renewable energy financing has a shorter maximum tenor of 10 years.
To safeguard borrowers from over-leveraging, the SBP has capped total monthly loan repayments, including the proposed housing finance and any other consumer loans, at 65 percent of a borrower’s net disposable income.
Banks and DFIs must also obtain updated credit information reports through the State Bank’s Electronic Credit Information Bureau or a licensed private credit bureau, with approved proxy models available to assess informal income where applicable.
Additional safeguards include mandatory documentation of property title and ownership, lenders’ formal acknowledgement of received documents, and a general requirement that financed properties be mortgaged in the lender’s favour.
For loans up to Rs. 5 million, a lien supported by a Green Property Certificate may serve as sufficient security. The framework also mandates comprehensive insurance or Takaful coverage equal to the outstanding finance amount, and lenders must clearly disclose coverage terms and charges to borrowers.
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