The State Bank of Pakistan (SBP) has increased the maximum repayment period for housing loans to 30 years under new rules that take effect immediately.
The central bank said the revised framework replaces several housing finance instructions issued between 2019 and 2021. It has directed banks and development finance institutions (DFIs) to follow the new rules.
Under the updated policy, people can use housing finance to buy a house, flat or plot, build a home, renovate or expand an existing property, and install renewable energy systems such as solar panels.
The repayment period for loans used specifically for renewable energy projects will be limited to 10 years.
The SBP has also introduced stricter checks to make sure borrowers can repay their loans. Banks and DFIs must obtain the applicant’s latest credit report from the SBP’s Electronic Credit Information Bureau (e-CIB) or an approved private credit bureau before approving financing.
The new rules state that a borrower’s total monthly payments on housing and other consumer loans must not be more than 65% of their net disposable income.
For housing loans above Rs10 million, banks and DFIs must get a property valuation from at least one valuator approved by the Pakistan Banks’ Association. For loans of up to Rs10 million, banks can use their own internal valuation.
The SBP has also made it mandatory for properties bought or built through housing finance to be mortgaged to the lending bank or DFI. However, for loans of up to Rs5 million, banks may accept a lien on the property if the borrower provides a Green Property Certificate or a similar document.
The revised rules also require borrowers to have insurance or takaful coverage for financed residential properties. The coverage must match the outstanding amount of the housing loan.
Banks and DFIs must also clearly inform borrowers about the insurance or takaful coverage, premiums and any other charges before providing the financing.