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Need to strengthen framework for more house loans

Country facing shortage of around 10 million housing units
MCB Home Loan fulfilling dream; opens doors to numerous sensible financing options

While the country is facing shortage of around 10 million housing units, the formal financial sector caters only around 2-percent of all housing transactions, which is the lowest ratio in region. As per estimates, there was shortage of around 8 million housing units in 2009, which has been accumulating by 10 million this year. As per estimates, 4 million Pakistanis live below standard housing while roughly 70-percent of the world’s population will live in urban centers by 2050, a staggering figure, and alarmingly most governments seem either unwilling or unequipped to address the problem.

According to a report, the property development industry suffers from low public confidence. Financial weaknesses and the absence of clear and fair business practices have affected its credibility, contributing to the reluctance of financial institutions in providing development and construction finance. There is a need to strengthen the property titling and land administrative procedures including improvements of the legal provisions, standardization of processes, and computerization of all relevant revenue records.

Although the regulatory framework for land registration and transfer regime exists in Pakistan, the process by which land is acquired and registered is cumbersome at times, because of number of institutions and registration procedures required to execute property transactions, a report observed. In this backdrop, there is need to strengthen framework for house loan by the banking sector and by promoting house loan by banks, we can overcome shortages of housing units.

As time passes, inflation, economic conditions and financial burden make it harder for a common Pakistani citizen to even dream of having a home. Gradually, the banking system developed and started offering home loans. From easy down payment spread over 3 -20 years span of installments make it easy for a person to own their home. So with convenient home loan options in Pakistan, people begin to think that they should have a house of their own.

Almost all the commercial banks are offering home loans with different terms and conditions.

According to CEO of Pakistan Furniture Council and ChenOne Builders Mian Kashif Ashfaq, Pakistan is faced with huge shortage of houses due to ever increasing population growth, which need concrete and corrective measures on emergent basis otherwise this shortfall is expected to swell up to 20 million residential units by the end of 2025.

In order to cope with this challenge, he said, Pakistan needed to ensure construction of one million new residential units in the housing sector every year but currently, the country’s pace on this count was as low as 150,000 to 200,000 new houses per annum. He said after having a detailed meeting with a seven-member delegation of builders and investors he cited that India started ambitious plan to build 20 million housing units at a cost of US $ two trillion in next seven years, however, a lot had yet to be done in Pakistan to tackle effectively this issue of important nature.

He urged the government to introduce housing finance schemes easily accessible to lower middle and the poor strata of the society. “For lower middle-class or people with monthly income ranging between Rs10,000 and Rs25,000, there is hardly any loan option available. According to World Bank’s report, housing-finance-to-GDP ratio in Pakistan was just one percent and seven percent in India, whereas 50 percent in developed world,” he mentioned.

Mian Kashif suggested the government to extend the scope of housing sector’s projects like Ashiana Housing Schemes in all parts of Pakistan, besides ensuring provision of free of cost land to people, who could not buy land to construct their own houses. He underscored that Pakistan must have to conduct as early as possible a latest and accurate population census and number of households to determine the exact number of housing shortage we face right now.

The need of the hour is to introduce soft loan schemes aimed at the less privileged strata of society for providing them affordable housing, apart from taking action for building a future plan for the low-income segment.

MCB HOME LOAN PLAN

With MCB Home Loan fulfilling the dream of owning a house has become so easy. MCB Home Loan opens doors to numerous sensible financing options to help you purchase, build or renovate your new/existing home.

Sources in the MCB Bank said, MCB Home Loan covers as follows:

Home purchase: Purchase of ready property.

Home construction: Construction of house on land owned by borrower(s) where the loan is disbursed in tranches.

Home renovation: Renovation/improvement of existing home where the loan is disbursed in tranches.

Plot Purchase and Construction: Purchase of land/plot and construction on it where the loan is disbursed in tranches.

This Home Loan facility is for cities of Karachi, Lahore, Faisalabad, Rawalpindi and Islamabad.

Following are general terms and conditions for this scheme:

Repayment in equal monthly installments (EMI); Information regarding availed loans from other banks should be authentic; Personal information should be valid; Mandatory verification checks of borrowers and collateral; Bureau reports regarding repayment history of all borrowers wherever applicable should be unambiguous, positive and satisfactory; Property insurance is mandatory; Equitable/token registered mortgage/registered mortgage as per Bank’s requirement; Collateral appraisal through bank’s approved valuation agencies; and Income estimation through bank’s approved agencies.

Further, debt to equity ratio to be as per Bank’s requirement while maximum loan tenure is 20 years. The collaterals are evaluated by bank’s approved evaluation agencies. Floating rate is extended for home finance which is re-priced on first working day of each year. The spread would, however, remain constant while the change in KIBOR shall affect the pricing.

ELIGIBILITY CRITERIA
  • Applicant(s) must be Pakistani Resident Nationals
  • Salaried, Self Employed Businessmen / Professionals
  • Satisfactory verifications
  • Satisfactory bureau checks
  • Satisfactory income estimation, property valuation and legal opinion
  • Loan Amount
  • Home Purchase: Rs50 Million
  • Home Construction: Rs25 Million
  • Home Renovation: Up to Rs15 Million
  • Plot Purchase Plus Construction: Rs 50 Million
REQUIRED DOCUMENTS
  • Application form
  • Copy of valid and original CNIC/SNIC
  • Two passport size photographs
  • Declaration of all financing facilities availed from all banks/DFIs
  • Income documents
  • Business /employment proof
  • Copy of property documents
  • Any other document required by the Bank

The MCB Bank is country’s leading bank catering to needs of its customers. It is expected that the bank would give some beneficial schemes to help overcome shortages of houses.

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