Provision of subsidy on loans for low-cost housing under study

ISLAMABAD: The government is exploring options to provide an interest rate subsidy on loans for low-cost housing, specifically for three- to five-marla units, in a bid to make home ownership more accessible for low- and middle-income families.

According to sources, relevant ministries have been tasked with determining the exact construction cost of such small housing units so that commercial banks can allocate appropriate funding in the coming years.

The planning ministry, in an official statement issued on Monday, said that Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal chaired a high-level meeting on affordable housing finance. The meeting aimed to tackle the persistent challenges in long-term housing finance and evaluate viable policy models to promote low-cost housing across Pakistan.

The session was attended by Planning Secretary Awais Manzoor Sumra; the governor of the State Bank of Pakistan (SBP); the vice chancellor of PIDE; CEOs of private banks; and representatives from PMRC and the National Bank of Pakistan.

Participants reviewed international best practices and mortgage models from countries including Singapore, South Africa, Turkey, Bangladesh, Brazil and India. The discussion focused on developing a realistic and sustainable housing finance framework tailored to Pakistan’s socio-economic conditions.

Iqbal noted that the lack of long-term housing finance remains one of the country’s greatest obstacles to achieving widespread affordable housing. He recalled that significant strides had been made in 2017-18, but momentum was lost due to political instability. “When there is no policy continuity, it is the public that pays the price,” he said.

Citing the success of auto-leasing models in the private sector, the minister questioned why similar frameworks could not be implemented for housing. “Millions of people spend their entire lives in rented homes. Home ownership should not be an unattainable dream for the salaried class,” he said. “An average income earner cannot afford to build a home worth two to three crore rupees through lump-sum payments.” He advocated for a mortgage-backed housing finance model similar to auto-leasing, supported by robust government policy. “The government is ready to offer 100 per cent guarantees to banks to protect their capital,” he announced.

Member Infrastructure Waqas Anwar presented the planning ministry’s proposed financial framework. It was also noted that the Punjab government is preparing to roll out its own housing scheme. To address legal and regulatory requirements, the planning ministry will coordinate with Federal Law Minister Azam Nazeer Tarar.

The minister urged private banks to adopt a market-based approach to housing finance without hesitation, pledging full government backing. “Creating an easy housing finance framework is not rocket science. Models from around the world have worked—we just need to adapt them for our needs,” he said.

He also suggested targeted government subsidies for smaller housing units -- such as three-marla homes -- while allowing commercial banks to independently design financing frameworks for larger properties, such as 10-marla houses and above.

“This initiative can bring about a transformative shift in Pakistan’s housing sector, while contributing meaningfully to economic growth, infrastructure development, and social uplift,” said Iqbal.

Private banks responded positively to the proposals and expressed a willingness to work collaboratively on developing a practical financing model for affordable housing.“This is not just a policy initiative -- it is a national economic and social imperative,” the minister concluded.