Housing sector

Bank of Punjab: housing sector in Pakistan

Housing industry in Pakistan

Pakistan, the 5th most populous country in the world, thrives with a young population at a population growth of 2.4%. According to various statistics available on the web, the housing and construction industry in Pakistan accounts for 2.5% of the GDP and employs around 8% of the country’s approximately 60 million working population.

It acts as a stimulus across the economy by leveraging growth, investment and employment through a constructive value chain by supporting approximately 40 industries directly or indirectly. In a country where 37% of the population lives in urban areas, there is a shortage approximately 12 million housing units and is expected to reach 17 million by 2025.

In a country with growing inflationary pressures, which weigh on the purchasing power of ordinary mortals, access to financing for this sector remains a challenge for both manufacturers and end users.

Additionally, the shortage of housing inventory, insignificant product innovation, complex mortgage documentation, limited availability of long-term financing solutions, lack of urban planning concept and development of new towns, and a volatile real estate market are other significant issues facing this industry. .

Read more: Role of banks in mortgage financing

Measures taken at national level

Despite the above challenges, all industry players are determined to bring about reforms to energize this sector to enable it to operate to its full potential: the government has extended its support in developing the mortgage market and also:

  • Presentation of the National Financial Inclusion Strategy (SNIF)
  • Formation of a special task force for low income housing
  • Establishment of Naya Pakistan Housing Development Authority (NAPHDA)
  • Reduced income tax from 35% to 20% on low-cost housing finance Formalized foreclosure laws and streamlined tax structure
  • Introduction of the government’s mark-up subsidy program for low-cost housing
  • Establishment of Pakistan Mortgage Refinance Company to support loan losses and provide cost-effective pre-financing and refinancing for financial institutions.
  • The State Bank of Pakistan, through various regulatory interventions, also provides sufficient playing ground for banks/DFIs, which includes easing the general reserve requirement, reducing risk weights for exposure to low-cost housing while calculating MCR, introduction of Roshan Apna Ghar for Pakistani Diaspora, higher loan-to-value ratio for low-cost housing, relaxation of exposure limit on real estate sector for banks and assigning mandatory housing finance targets for banks, MFBs and HBFCs

Read more: Pakistan’s failure to promote low-cost housing? A historical overview

Ongoing issues

  • Banking of informal workers
  • Lack of affordable housing inventory Insignificant product innovation
  • Complex mortgage documentation
  • Ever-increasing construction cost

Read more: Zeeshan CEO Ali Khan (Zameen.com): In depth on the digital transformation of the real estate market


Role of the BOP

In housing, BOP is rapidly evolving to become the leading bank in the sector, as evidenced by the growth of its housing portfolio from Rs. 3 billion to Rs 16 billion over a period of 1.5 years. In low cost housing, the bank has gone from an insignificant portfolio on April 21 to over Rs. 1.2 billion and over 400 units by October 2021. This was only possible through dedication and l commitment of the Bank’s Board of Directors. BOP has undertaken various structural and strategic reforms such as:

  • Oversight of the housing segment at Board and CEO level through the Board Committee for Priority Sectors chaired by Dr. Muhammad Amjad Saqib, Founder of Akhuwat.
  • Digitization of loan applications and loan processing, including document collection.
  • Formation of the centralized credit factory.
  • Improve customer experience through increased modes of communication: electronic follow-up, SMS alert, joint 24 x 7 call center and dedicated complaints management.

At BOP, the focus is on low-cost housing. As a public sector bank, we have received an overwhelming response to the Government’s Enhanced Subsidy Scheme (GMSS) for housing. The bank is engaged in various GoP, GoPb and SBP initiatives for the housing and construction industry. At the federal government level, BOP is involved in NAPHDA and actively contributes to the reform agenda. BOP is the lead bank for the consortia formed by the LDA City Housing Project and GoPb’s Peri-Urban Project. The bank is moving forward with dedication towards maturing the two transactions, step by step.


The Punjab government intends to provide low-cost constructed housing on state-owned land located in the peri-urban areas of the Punjab province. Under this project, GoPb plans to build over 122,000 units in 146 Tehsils across the province and has so far identified 34 suitable sites for development and construction. It is estimated that approx. 10,000 homes will be built on these 34 sites as part of phase I of the project. So far, 3 sites (Raiwind, Sargodha and Chiniot) have been mobilized through EPC contracts with FWO and NLC for the construction of 839 social housing units. The cost of a detached house is approx. PKR 1.8 million, of which NAPHDA will pay PKR 300,000 as a cost subsidy, while the remaining amount will be funded through mortgage finance facilities provided to individual buyers by a consortium of 10 banks led by BOP. BOP has so far received funding commitments totaling PKR 14 billion for Phase I of the project from participating banks.

BOP is also a leading bank in the design and implementation of the Roshan Apna Ghar product. It is a fully digitized platform and invoicing documents are digitally signed. Hence, providing overseas Pakistanis with the opportunity to own a home in their home country on easy terms. Both Link-Based and Non-Link-Based Products are available under this umbrella.

Read more: Government to launch Roshan Apna Ghar program for expatriates: Farrukh

BOP is also one of the major contributors to the Kamyab Pakistan (KPP) program. Mr. Zafar Masud, President and Chief Executive Officer of the bank, is also the leader of the steering committee of the program. Under the scheme, housing loans will be provided to Pakistanis who belong to the lowest income group. These loans are based on the idea of ​​microcredits through microfinance providers on the basis of funds provided by wholesale lenders.

For sustainable business growth and to address the gap between demand and supply, the bank has formed alliances with developers, builders and corporate entities for end-to-end transaction optimization. The Bank has entered into an exclusive partnership with MAAKSONS (Pvt. Ltd), the highest rated engineering and construction company in the country, to provide finance to developers and end users for 246.3 Marla and 160.5 housing units Marla in her flagship. GARDEN SQUARE Gujranwala housing estate. The bank has similar agreements with DHA Bahawalpur, FGEHA, Akhuwat Islamic Microfinance Bank, Daewoo Pakistan, Kings Developers & Greenwood City.

Long term finance solutions and availability of credit loss guarantees are some of the challenges we are trying to address by utilizing the opportunity offered by Pakistan Mortgage Refinance Company (PMRC). BOP is the first bank in the industry to sign a memorandum of understanding with PMRC to benefit from refinancing and first loss cover on the low-cost housing portfolio. It is believed that PMRC’s innovative proposal will go a long way in boosting industry confidence.

Read more: Chairman General Anwar Ali Hyder (NAPHDA): Unpacking the Low Cost Housing Initiative


To come up

There is a lot to be done by all stakeholders in the area of ​​housing. Fortunately, the environment seems to be conducive, and an all-out effort will prove very successful in accelerating the growth of the housing sector: First, the continuity of subsidized schemes should be provided by the government such as GMSS for small – Cost Housing has seen a considerable increase in mortgage financing activity. Optimization of the conventional mortgage process, including computerization of land records to facilitate retrieval of documents, facilitation of one-stop shopping, streamlining of transfer fees and waiver of mortgage fees on behalf of banks , the development of a rating engine and statistical dashboards for customer assessment, facilitation by ESCROW accounts for payments to regulate transactions and regularization / licensing of real estate agents and the formation of their governing body are future steps that could be a game-changer in terms of developing the housing finance ecosystem in the country.