The State Bank of Pakistan has implemented a series of regulatory relaxations to its prudential requirements to fast-track the government’s flagship housing initiative, the Wazir-e-Azam’s Apna Ghar Program. This strategic move by the central bank is designed to overcome existing barriers in the mortgage market, specifically targeting the acceleration of loan approvals and expanding the reach of affordable home ownership to a larger segment of the population. In a formal circular issued by the SME, Housing and Sustainable Finance Department, the regulator clarified that these eased conditions apply to all commercial banks and the House Building Finance Company Limited (HBFCL).
A primary highlight of the revised framework is the significant adjustment to the debt burden ratio. The central bank has increased this limit, now allowing a borrower’s total monthly repayment obligations—including the new housing loan and any existing consumer debt—to reach up to 65 percent of their net disposable income. Previously more restrictive, this expansion in the debt-to-income allowance is expected to qualify a much broader pool of applicants who were previously excluded due to high debt-service requirements relative to their monthly earnings.
To further simplify the borrowing process, the State Bank of Pakistan has overhauled the requirements for property valuation. For housing units valued up to 5 million rupees, lending institutions are now permitted to rely on their own internal valuation mechanisms rather than seeking external reports. For properties exceeding this value, the requirement remains that at least one valuation must be performed by an evaluator listed on the Pakistan Banks’ Association approved panel. This tiered approach is intended to reduce the cost and time associated with smaller mortgage applications, which often faced delays due to formal appraisal bottlenecks.
In an effort to ensure administrative efficiency, the central bank has introduced a strict timeline for credit processing. Banks and HBFCL are now mandated to complete the credit approval process within 15 working days from the moment they receive a fully documented application under the Apna Ghar scheme. This directive aims to address long-standing complaints regarding the slow pace of mortgage processing in the country. The regulator specifically noted that Prudential Regulations HF-3 and HF-7 have been relaxed to the extent necessary to facilitate these changes, while emphasizing that all other safety and soundness guidelines must be strictly followed.
These measures represent a proactive attempt to revive the national housing finance sector, which has historically struggled with low mortgage penetration despite surging urban demand. By increasing borrower eligibility and forcing faster turnaround times, the State Bank is positioning the financial sector to play a more central role in addressing the country’s housing shortage. As banks begin to implement these updated instructions, the market will be watching closely to see if these regulatory shifts lead to a tangible increase in the volume of home loans disbursed under the government’s affordable housing umbrella.
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