The federal government has introduced a subsidized housing finance scheme called “Mera Ghar – Mera Ashiana” to help middle and lower-income families achieve homeownership amid soaring property prices.
According to a circular issued by the State Bank of Pakistan to commercial banks, the Housing Building Finance Corporation, and microfinance banks, the initiative is meant to ease Pakistan’s growing housing affordability crisis.
In recent years, property prices have surged to record levels, with even small houses in Karachi now costing at least Rs10 million.
Driven by speculative investment and the influx of black money, this rise has placed homeownership beyond the reach of most Pakistanis, especially those in the middle and lower classes.
Successive governments have largely avoided regulating the market, allowing prices to spiral unchecked.
The new scheme offers subsidized loans of up to Rs3.5 million for buying or building affordable homes. Financing is available for the purchase of a ready house, construction on an existing plot, or the purchase of a plot followed by construction.
The scheme applies only to homes up to five marlas or flats and apartments no larger than 1,360 square feet (around 120 square yards).
Loans are structured in two tiers: Tier-1 provides up to Rs2 million, while Tier-2 covers between Rs2 million and Rs3.5 million. Borrowers can repay over a period of up to 20 years, with the government subsidizing the markup for the first 10 years.
The interest rate will be linked to the one-year Karachi Interbank Offered Rate (KIBOR) plus a 3 percent margin. However, banks cannot charge processing fees or penalties for early repayment.
To be eligible, applicants must be Pakistani citizens, first-time homebuyers, and must not already own property.
The loan-to-value ratio is set at 90:10, with the government covering 10 percent of portfolio risk on a first-loss basis.
Fixed pricing has been set at 5 percent for Tier-1 loans and 8 percent for Tier-2, reducing the financial strain on low-income households.
The State Bank has directed all participating financial institutions to clearly inform applicants of the scheme’s terms and to establish strict systems to prevent misuse. A mechanism for markup subsidy payments and credit loss coverage will be announced soon.