Low-cost home loans peak on political uncertainty

KARACHI: Housing loans extended by commercial banks under government's low-cost 'Mera Pakistan Mera Ghar' scheme hit their highest in February 2022, latest data showed on Thursday, for the most part because of ongoing political uncertainty.

During the last month, banks credited an amount of Rs9.3 billion, which is 17.5 percent of the total disbursements made so far since the launching of the scheme in October 2020.

“There’s too much pressure from the borrowers,” a bank official dealing with the scheme told The News.

“Uncertainty whether the present government, which is facing a no-trust vote in the parliament, stays or goes, is making people edgy.”

He said if the government was forced to leave office, the future of the scheme would become increasingly uncertain. “This is what is actually frustrating the people into applying more and more for the low-cost housing finance loans,” the banker added.

The banks started extending housing loans from December 2020, according to the data available on the State Bank’s website, and total disbursement under the scheme has reached Rs53 billion until now.

However, it is only 15.7 percent of the total applications received as yet by banks under the scheme. Banks have received requests for Rs338 billion, while the credited amount is only 35.7 percent of the total approved amount of Rs148 billion.

“Many people are eligible for the loan. But finding a house is difficult especially in Karachi,” the banker said.

“There are issues in property papers. Many properties don’t even have leases, some are yet to get building approvals, and others are devoid of building plans.”

“People can buy properties on cash but banks won’t approve such properties to finance them. The property papers must be complete, clean and straight,” the source added.

Mohammad Ali, a real estate agent in Akhtar Colony, Karachi, said people were struggling to get their token money back after banks rejected papers for one reason or another.

He added they were dealing in property for years and had never encountered any serious issues in papers.

“Now we don’t waste time on clients looking to buy property after approval of house loans,” he said.

Tahir Abbas, Head of Research at Arif Habib Ltd, attributed this spike in the housing loans to the central bank-led awareness drive and normalisation of property rates in the country.

“In the beginning, sellers were asking high prices for their properties, but the supply side improved. Increasing housing unit availability normalised property rates. People are now on a buying spree under the scheme,” Abbas added.

According to sector experts, such schemes don’t happen to help much because they also tend to push property prices up.

However, a source in the State Bank of Pakistan said it would only be correct to say that if the supply side remained stagnant and the scheme pushed the demand for houses up.

However, if supply side, which is the construction of houses in this case, also increases at a pace that matches the increase in demand, the pressure on house price will remain stable.

Mohammad Azam, another estate agent in the PECHS area, said investors in property business had become idle in the city, because of increase in property valuation and Federal Board of Revenue’s strict rules.

“Property investors are now moving to suburbs and investing in inexpensive properties, which also don’t have the government papers,” he said.

“They don’t have to pay the government fees when they sell or purchase those properties; therefore, they also remain out of the government’s sight, evading taxes and other fees.”

Azam added that there were many genuine buyers in the market at the moment who were looking to purchase a house by availing the government’s low-cost housing loans.