SBP extends housing loan tenor to 30 years

According to Dawn, the State Bank of Pakistan has amended its prudential regulations to lengthen the longest repayment period for housing finance to 30 years, up from 20 years. Banks had argued that they could not offer longer loans because their deposits run for only five years, and the lack of long-term funding was the main hurdle. The revised rules also set the loan-to-value ratio at up to 90:10.

Under Regulation HF-6, the debt-burden ratio requires total monthly amortisation payments, including all other consumer financing, to stay within 65 per cent of a borrower's net disposable income. Banks and DFIs will rely on informal-income proxy models circulated by the Pakistan Banks' Association when assessing a borrower's income and repayment capacity. Housing loans may be used only to buy a house or apartment, build on an owned plot, buy and build on a plot, extend or renovate a home, or install renewable-energy systems.

Regulation HF-2 requires banks and DFIs to adopt standardised, simplified application forms. Lenders must also itemise each required document, offering the list in paper and electronic form in Urdu and English.