A mortgage in Pakistan, Naya Pakistan house loan; all you need to know
A mortgage or home loan is a loan that anyone gets from a bank or private mortgage company on the fixed or variable interest rates to construct a house or to purchase a house.
Most banks ask for a guarantee to give house loans. It may be pledging of your house or property or the bank can keep gold or defense saving certificates as a guarantee worth the loan amount. Some banks ask a guarantee of government officers having more than 8 years in retirement.
Is mortgage or home finance is secure in Pakistan?
Mortgage or home finance is secure until you 'repay' all loans in time and get your belongings free from bank intervention. If you fail to pay your installments in time then banks have the right to possess your house or property and sell to grab its money back.
Why is a mortgage or home finance is not popular in Pakistan?
Like every adult in the world, Pakistani also dream and put effort to make their home. On average, a middle class Pakistani is hardly able to construct its own home at a young age. A large number of people live on highly rented houses in cities for the whole of their life.
With a large bracket of low-income groups, people hardly can buy a land or plot with all their savings and left nothing to bear the high construction cost on it. Unfortunately, there is not any suitable system for mortgage or home finance in Pakistan.
The interest rate on home financing is from 8% to 10% depending upon KIBOR Rates. It is usually very high in Pakistan and the repayment time spans from 5 years to 15 years mostly increasing the installment amount. Financial sector is catering 2% of all housing finance which is lowest in the region.
In comparison, the interest rate on house mortgage is 2% to 4% in European countries, and the time limit span from 5 to even 30 years with various plans.
People in Pakistan feel to get trap, once they get into mortgage plans as banks confuse them in between varying & fixed interest rates and increasing installment amounts and mortgage becomes a nightmare for most.
Asides interest is forbidden in Islam, that drives many to avoid mortgage or house financing in Pakistan.
Pakistani Banks offer Islamic house financing that is Sariah-Compliant to attract customers.
Banks also complain of the nonpayment of loans in time and ask for guarantees and a lot of paperwork that makes it difficult to apply or get home finance.
Which Pakistani bank give home loans
Almost all Pakistani banks i.e. HBL, Askari bank, Meezan bank, National bank, Bank AL Habib, Alfalah bank, JS bank, Standard chartered and many other offer home finance or mortgage plans on the interest of 8% to 10% ranging from 2 million to 5 million. The minimum salary or per month income should be above 70,000 to apply for a bank home loan. For a few banks minimum per month salary or income, the requirement is Rs 150,000.
The interest rate may be fixed or variable depending on the consumer choice and the loan should be repaid in 5 to 15 years' time.
With a loan of 2 million or 20 lakhs, a minimum monthly installment ranges between 20,000 to 60, 000 depending on the time period you choose to repay the bank and other factors. Tenure and financing also depends on the age of applicant.
What is Naya Pakistan mera pakistan, mera ghar home finance loan scheme
To keep his promise of 50 lakh houses, the PTI government initiated a Naya Pakistan home scheme to facilitate the lower income group to construct their own house.
Mera Pakistan, Mera Ghar house financing is a type of conventional mortgage too with flexible conditions.
Other than constructing units or apartments, the government has Extending the Naya Pakistan housing scheme to home financing loans under Naya Pakistan or even outside the scheme under Mera Pakistan, mera Ghar. A government subsidized mark up rate of 5% in initial 5 years of loan tenure of 20 years is being offered from commercial banks under guidance of State bank of Pakistan. The loan will jump up to 7% for next five years and will continue regular KIBOR or market interest rate at last 10 years.
This announcement has opened the hope for many middle-class residents who have plots but not finance to construct on it.
Imran Khan announced home financing or mortgage plans to construct 5 marla and 10 marla houses just on 5% and 7% interest rate.
Any person who owns 5 marlas can get up to 3 million or 30 lakhs on 5% interest to construct a house. On a 10 marla plot, a loan of up to 5 million or 50 lakhs can be grabbed with an interest rate of 7%.
A Pakistani citizen having a plot in any registered society can apply for the Naya Pakistan loan scheme from commercial banks. The form are available to apply online as the ministry of finance has released an amount of Rs 30 bn as subsidy for the Naya Pakistan scheme and a portion will be used further for those people who will borrow from banks to construct their home will be given a subsidized interest rate.
Asides govt also has asked State bank of Pakistan and other banks to set 5% of their portfolio for the construction industry.
According to a rough plan, a total repayable amount with a 5% interest in 300,0000 is about 150,000. It sums up with a total of approx. 3300000 loan. An estimate of minimum installment can be from Rs 14,000- Rs 20,000 payable in 20 years. It is a rough estimate that can vary depending on the interest rate.
Naya Pakistan home finance is hoping to have these salient features:
- longer tenure loans from 15 to 20 years to increase the buying power of consumer
- cutting down approval time by one window operation
- commercial banks will also be on board to give loans on a 5% interest plan.
- To increase the financial resources of banks pension funds, zakat funds, provident funds at disposal if insurance companies. EOBI, social security institutions, etc.
- The banks would be allowed to park funds parked in the housing industry with remortgage companies on the creation of secondary financial markets.
- The clubbed income( a total family income husband, wife) can be shown to get a Naya Pakistan home loan.
We hope this plan will aid many Pakistanis to make their dream true to construct their own home at an early age. In a way, people pay will pay rent for living in their own house and once the loan is up, they are complete owners. There is not any announcement yet to when to apply for a home finance loan under Naya Pakistan but we hope to start it by the end of August,20.