The State Bank of Pakistan (SBP) carried out a new policy regarding the exposure limit of investment and financing. The revised limit has observed an increase from 15% to 25% for banks to help various banking companies to achieve their targets for the housing and construction sector of Pakistan.
The regulatory authority has been aggressive in positively promoting this sector in order to reduce the deficit of housing demands across the country. This will also benefit in promoting construction activities to generate economic opportunities across various sectors. The increase in Banks’ exposure limit has provided an opportunity for banking companies to generate increased funds to meet the demands of the housing and construction sector including builders and developers, & residential and non-residential customers.
This has been a major step in boosting house financing and the banks are allowed direct financing or investment in bonds, TFCs, and sukuk issued by the Real Estate Investment Trusts (REITs) management companies.
In April 2021, in order to increase the funding for the housing and construction sector with the help of capital markets and microfinance banks (MFBs), the SBP allowed the counting of the following exposures of banks/DFIs towards the achievement of their housing and construction finance mandatory targets:
- Direct financing to/or investments in bonds/TFCs/Sukuk issued by Real Estate Investment Trusts (REITs) Management Companies.
- Investments in units/shares issued by Real Estate Investment Trusts (REITs), subject to compliance with all other applicable regulations.
- Investment in Sukuk/bonds issued by Pakistan Mortgage Refinance Company (PMRC), however, investment in PMRC’s Sukuk/bonds and amount of refinancing availed from PMRC shall be netted off towards counting the mandatory target.
- Financing to MFBs for extending housing finance to eligible borrowers to the extent of actual disbursements by MFBs. Banks extending financing to MFBs for housing finance will have to report such transactions to SBP separately.
