KARACHI:
Exciting news for low-income families in Pakistan! The World Bank is set to provide a substantial credit line of $500 million for affordable housing. This initiative will significantly support Prime Minister Imran Khan’s ambitious plan to build five million homes aimed at low-income households.
In addition, the International Finance Corporation (IFC), a part of the World Bank Group, has stepped in with an investment of $3.2 million in the Pakistan Mortgage Refinance Company (PMRC). This funding aims to specifically boost low-cost housing initiatives in Balochistan and Khyber-Pakhtunkhwa (K-P).
Originally, the $500 million credit line was planned to be established in 2020, but the unforeseen COVID-19 pandemic caused a delay. Now, it’s expected to be available by June 2021, promising a revitalisation of the housing sector.
According to Mudassir H Khan, PMRC’s Managing Director, the firm plans to offer low-cost housing financing at a competitive mark-up rate of around 6% for up to 25 years. This means banks could potentially charge around 8-8.5% overall, allowing individuals to secure up to Rs5 million in financing for their new homes.
This upcoming credit line will mark the second collaboration between the World Bank and PMRC, following an initial $140 million investment that had already facilitated Rs11.5 billion in financing to banks for housing projects over the past year and a half.
Established as a public-private partnership by the central bank, PMRC launched its commercial operations in November 2018. In a recent move, PM Imran also announced a relief package, allocating Rs30 billion for low-cost housing, alongside favorable tax regimes for developers.
IFC Takes a Stake
Interestingly, the IFC has acquired a 12% stake in PMRC through its $3.2 million investment, marking its first venture into Pakistan’s housing sector. PMRC is prepared to provide Rs750 million in financing (including the amount from IFC) to banks that have strongholds in Balochistan and K-P, enabling them to offer low-cost housing loans.
For the middle-income segments, PMRC is expected to provide loans with a mark-up of 6.5%, allowing them to access up to Rs10 million each. For higher-value loans exceeding Rs10 million, banks will apply the standard market rates.
Banks participating in PMRC’s risk-sharing scheme, valued at Rs1.65 billion ($10 million), can extend financing for low-cost housing from their resources. This initiative is designed to mitigate risks, encouraging banks to offer long-term financing options for these housing projects.
With the expansion of the credit line to $100 million under the new initiative, it’s anticipated that banks will provide a staggering Rs380 billion in financing. PMRC aims to contribute Rs100 billion in loans within the next five years, benefiting builders and the general public alike.
In this rapidly evolving landscape, access to affordable housing is becoming a significant reality for many Pakistanis. As the government and international organizations work hand-in-hand, a brighter future awaits those in need of shelter.
