Bank financing for construction sector jumps 85% in 2021 – Journal


KARACHI: Bank lending to the housing and construction sector increased by an unprecedented 85% in calendar year 2021, while loan disbursements under the Prime Minister’s low-cost housing program also increased reached 38 billion rupees.

The State Bank of Pakistan (SBP) on Thursday announced very high growth in funding for the housing and construction sector, but it still fell short as the government wants to build 5 million houses over the course of his term of office ending next year.

“Recording an unprecedented 85pc growth, banks’ outstanding loans for the housing and construction sector increased from Rs163bn to Rs355bn in 2021,” the central bank said in a circular.

In October 2020, the government introduced a marginal subsidy program, commonly known as Mera Pakistan Mera Ghar (MPMG), aimed at boosting the housing sector by providing cheaper loans to low-income families to build their own. House.

Mera Pakistan Mera Ghar disbursements reach Rs 38 billion

“Within the housing and construction portfolio, disbursements under the MPMG have increased by 38 billion rupees,” said the SBP.

Since the end of the amnesty plan on June 30, 2021, the inflow of investment in the housing and construction sector has declined significantly. The builders have asked for an extension of the amnesty program, but the government seems determined not to extend it. The amnesty program allowed black money to join the industry, which artificially raised house prices across the country.

“Housing and construction finance, particularly under the MPMG, has seen impressive growth thanks to many enabling regulatory measures introduced after extensive stakeholder consultation,” the SBP said.

The SBP said it advised banks to increase their housing and construction finance portfolios to at least 5% of their domestic private sector advances through December 2021. The central bank also introduced a set of incentives and penalties to ensure compliance.

Habib Bank, Meezan Bank and Bank AL Habib were the top three contributors to the significant growth in housing and construction finance. These banks have also made significant progress in providing finance under the MPMG.

Funding under the MPMG accelerated in 2021, with bank funding approvals rising from nearly zero to 117 billion rupees in 2021.

“Banks have received funding requests of Rs 276 billion from potential customers, indicating that approvals and disbursements will continue to increase in the coming months,” SBP said.

Bank Alfalah became the first bank with the highest disbursement of Rs3.3 billion, followed by nine banks with disbursements of over Rs2bn each. These include Meezan Bank, BankIslami, National Bank, Standard Chartered Bank, HBFCL, United Bank, MCB Bank, Bank of Punjab and Habib Bank.

The SBP said it has taken a number of steps to create a regulatory environment for banks to increase funding for the housing sector. The main initiatives include the acceptance of third party guarantees during the construction period, the waiver of the debt load ratio (DBR) in the event of informal income, and the introduction of standard letters of offer of facility by banks.

The SBP has also advised banks to develop and deploy income estimation models for borrowers with informal income sources.

In addition, the construction sector was declared an industry. This brings tax relief to companies in the sector through changes to the tax ordinance. Tax policy reforms offer many incentives to builders and developers as well as entrepreneurs. These include lower tax rates and the removal of many taxes that previously hampered the ease of doing business in the industry.

Posted in Dawn, January 7, 2022


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