Banks allowed to invest in TFCs

KARACHI: The State Bank of Pakistan has allowed banks and development finance institutions (DFIs) for investment in term finance certificates (TFCs), Sukuk, and share of real estate investment trusts (REITs) to achieve the mandatory housing finance targets, a circular issued on Thursday said.

In July 2020, the central bank advised banks and DFIs to achieve mandatory financing targets for housing and construction of buildings (Residential and Non-Residential) equivalent to at least 5 percent of their domestic private sector advances by December 31, 2021.

To increase funding for housing and construction through capital markets and microfinance banks (MFBs), the State Bank has decided to allow counting of the following exposures of banks/DFIs towards the achievement of their housing and construction finance mandatory targets, including direct financing to/or investments in bonds/TFCs/Sukuk issued by REITs management companies. Likewise, investments in units/shares issued by Real Estate Investment Trusts subject to compliance with all other applicable regulations, investment in Sukuk/bonds issued by Pakistan Mortgage Refinance Company (PMRC); however, investment in PMRC’s Sukuk/bonds and amount of refinancing availed from PMRC would be netted off towards counting the mandatory target.