Business
SBP raises housing finance limit to 90pc of property value
LAHORE – The State Bank of Pakistan (SBP) has revised its prudential regulations for housing finance, allowing banks and development finance institutions (DFIs) to finance up to 90pc of the value of a property.
The revised framework has taken effect immediately and replaces several earlier circulars issued between 2019 and 2021. The central bank has directed banks and DFIs to ensure strict compliance with the updated requirements.
What the revised housing finance rules cover
Under the new framework, banks and DFIs can provide financing for the purchase of a house, apartment or plot.
Financing can also be used to construct a house on an already owned plot, renovate or expand an existing house, and install renewable energy systems in residential properties.
The maximum repayment period for housing finance has been set at 30 years. Financing for renewable energy systems can have a maximum tenor of 10 years.
Banks can finance 90pc of property value
The revised rules set the maximum loan-to-value ratio at 90:10.
This means banks and DFIs can finance up to 90pc of the value of the financed property, while the borrower would generally need to arrange the remaining 10pc.
The framework also places a limit on the borrower’s repayment capacity. Total monthly amortisation payments, including the proposed housing loan and other consumer financing, cannot exceed 65pc of the borrower’s net disposable income.
Credit checks and income assessment
Banks and DFIs will be required to obtain the latest credit information report for prospective borrowers from the SBP’s Electronic Credit Information Bureau or a licensed private credit bureau.
Where applicable, banks can also use proxy models approved by the Pakistan Banks’ Association to assess informal income and the borrower’s repayment capacity.
Property documents and security requirements
Borrowers must submit title and ownership documents for the financed property, while banks and DFIs must issue a signed acknowledgement confirming receipt of the documents.
Banks and DFIs must generally mortgage the financed house, apartment or plot in their favour.
For housing finance of up to Rs5 million, banks and DFIs may accept a lien over the property as security if the borrower provides a Green Property Certificate or an equivalent document issued by the relevant authority.
New valuation requirements
The SBP has also prescribed valuation requirements based on the size of the financing.
For housing finance exceeding Rs10 million, banks and DFIs must obtain a property valuation from at least one valuator approved by the Pakistan Banks’ Association.
For financing of up to Rs10 million, banks may rely on an internal valuation.
What the new rules mean for borrowers
The revised framework could reduce the upfront amount required from eligible homebuyers, as financing may cover up to 90pc of the property’s value.
However, borrowers will still have to meet banks’ credit, income, repayment-capacity, documentation and security requirements before financing is approved.
Housing finance rules at a glance
| Requirement | Revised SBP framework |
| Maximum loan-to-value ratio | 90:10 |
| Maximum property financing | Up to 90pc of property value |
| Maximum housing finance tenor | 30 years |
| Maximum renewable energy financing tenor | 10 years |
| Maximum monthly debt payments | 65pc of net disposable income |
| Credit report | Latest report from SBP eCIB or licensed private credit bureau |
| Financing up to Rs5 million | Lien may be used with Green Property Certificate/equivalent |
| Financing up to Rs10 million | Internal property valuation permitted |
| Financing above Rs10 million | At least one PBA-approved valuator required |
| Security | Property generally mortgaged in favour of lender |
| Effective date | Immediately |
Key points:
- The State Bank of Pakistan has revised its prudential regulations for housing finance.
- Banks and development finance institutions can now finance up to 90pc of a property’s value.
- Borrowers can use housing finance to buy, build, renovate or expand homes and install renewable energy systems.
- The maximum repayment period for housing finance is 30 years.
- Total monthly loan payments cannot exceed 65pc of a borrower’s net disposable income.
- Financing above Rs10 million requires a valuation from at least one Pakistan Banks’ Association-approved valuator.
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