The State Bank of Pakistan has announced that it is working with the government to finalise a plan of action for applicants who have deposited token amounts with sellers under the now-suspended Mera Pakistan Mera Ghar Scheme.
The scheme has been suspended for two months while the government reviews its features to make it more practical in the current macroeconomic environment. For customers who have already received partial financing, the remaining amount will be disbursed according to their agreements with the financing banks.
Govt suspends Mera Pakistan Mera Ghar Scheme for two months
However, the more pressing concern is the thousands of customers whose applications have been approved after months of documentation, but have yet to receive any disbursements. Several of these applicants have deposited token amounts with sellers after pursuing the scheme for months.
The issue arose after the government abruptly suspended the popular ‘Mera Pakistan Mera Ghar’ (MPMG) Scheme, advising banks, Development Financial Institutions (DFIs), and microfinance banks (MFBs) to halt further disbursements on hold from July 1, 2022 till August 31, 2022.
My journey to becoming a home-owner: review of Mera Pakistan Mera Ghar scheme
Many applicants now fear losing their deposits after having paid millions in documentation and partial payments. One affected customer told us, “We followed all the directions set by our bank. We paid the valuation fee and after the bank approved the property, only then did we pay 10% of its value to the seller to confirm the deal. Our sale agreement is now in jeopardy.”
According to another customer, who has put down a significant amount of money for documentation and partial payment, he will now have to vacate his current home by the end of this month. This is because he has cancelled his rental agreement in anticipation of moving into the new house. However, it seems that he may have to delay his plans as the house is not yet ready for occupancy.
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“I have no clarity on what’s going to happen.”
According to data from the State Bank of Pakistan (SBP), banks had disbursed close to Rs100 billion by the end of June under the scheme. The central bank said that disbursements have been made to around 28,000 beneficiaries, meaning that the average amount of loan to each beneficiary stands at Rs3.57 million.
Nearly Rs236 billion has been approved by banks, however this points to the number of people who have yet to receive any amount. An official who is familiar with the matter said that there are close to 1,000 applicants with his bank alone who are still waiting for disbursement. There are 21 participating banks, but the number of applicants awaiting any disbursement after making the deposit varies significantly from bank to bank.
“The State Bank was vigorously pushing us to promote the scheme and then the government abruptly suspended it,” said a banker privy to the matter. “Now people are stranded and regularly visiting banks.”
The Pakistan Mortgage Refinance Company (PMRC) originally financed the housing scheme, which started in October 2020 with approvals starting in December the same year. In light of feedback from stakeholders, the government liberalised features of the MPMG scheme in March 2021 to benefit a larger number of people, according to information available on the SBP website.
The SBP collaborated with the government and Naya Pakistan Housing and Development Authority (NAPHDA) to create a scheme that would enable banks to provide financing for the construction and purchase of houses at low rates for low- to middle-income segments of the population. This scheme is available in both conventional and Islamic mode.
Pakistan’s housing mortgage-to-GDP ratio is just 0.3%, the lowest in the region, where the average for South Asian countries is 3.4%. The goal of this scheme is to increase access to housing for all citizens of Pakistan.
However, some have questioned the need for the SBP’s suspension of the PMRC, given that the World Bank is providing financing to top up the PMRC’s existing risk sharing facility for banks. The SBP has stated that this financing from the World Bank will allow the PMRC to continue meeting its obligations.
“Since banks had never ventured in low-cost housing, this infrastructure support has been very useful. As mentioned earlier, the scheme has been temporarily suspended in the wake of recent macrofinancial environment. Government is reconsidering the features of scheme to make it more targeted and conducive,” the SBP repeated in its response.