SBP revises housing finance rules with 30-year maximum tenor, 90% Loan-to-Value ratio

According to Profit, the State Bank of Pakistan has revised its prudential regulations for housing finance, and the changes apply immediately to banks and Development Finance Institutions (DFIs). The framework covers purchases of homes, flats and plots, construction on land the borrower already owns, extensions or renovations of existing homes, and renewable-energy installations in housing units. It supersedes older instructions from 2019 to 2021 on home and small business lending, and all lenders have been told to comply.

Housing loans can run for up to 30 years, while renewable-energy financing is capped at 10 years. The maximum loan-to-value ratio has been set at 90:10. Total monthly amortisation on the new loan and other consumer loans must stay within 65% of net disposable income, and where applicable, banks may use PBA-approved proxy models to estimate informal income.

Lenders must obtain each applicant's latest credit report from e-CIB or a licensed private Credit Information Bureau, and collect all title documents with signed acknowledgements. Properties must be mortgaged in favour of the lender, although a lien is acceptable for loans up to Rs5 million if backed by a Green Property Certificate. Valuations from a PBA-approved panel are required above Rs10 million, and insurance or Takaful cover must match the outstanding loan amount.