Don't forget the bells and whistles

Business Recorder

3 days ago

As massive as it was only a few years ago, the Naya Pakistan Housing Program (NPHP) is but a footnote in history. Literally. At least on the SBP website, it is tucked behind a small banner at the very bottom of the page.That the SBP did not completely remove it from existenceis a positive sign and we support that! The Shahbaz government now has plans to piggyback off of the scheme with a fresh and improved housing finance scheme, all with Rs5 billion earmarked for a mark-up subsidy.So,before it can fall prey to bureaucracy and poor policy planning, here are a few lessons that MPMG 2.0, or whatever else the government might call it, must consider.
One: ensure that the subsidy is well-targeted. One of the biggest design flawsof MPMG was its lack of transparency and focus. Though seemingly the scheme was designed for low-income segment (or households), that term was never defined, either directly or indirectly. The defined criteria were not based on household incomes but on the value of the property. The subsidy was lottery-based, rather than need-based. The policy cannot be vague about who is the target audience and must explicitly define who qualifies as low-income and ensure subsidies go to them. For informal income borrowers, alternative credit models must be adopted to evaluate risk.
Two: be targeted, data-backed and transparent. It is entirely possible that an internal impact assessment of MPMG was conducted and circulated among policymakers, but if such a report exists, not even a summary was made public.The SBP published superficial data that showed the loan amounts being requested every month, the disbursements made, and the approval rate of these loans, but beyond that, no data was published for public consumption. To date, the public still does not know how many new borrowers were served by the scheme.
Based on rough estimates, for an average loan size between Rs2 million and Rs10 million, the scheme served between 10,000 and 50,000 borrowers. That range is far too broad to draw any meaningful conclusions about the scheme or its impact.SBP should have published borrower profiles, loan-to-value ratios, default rates, and other key indicators. Policies cannot be evaluated, improved, or externally reviewed without reliable, disaggregated data on loan beneficiaries, loan types, housing stock, and credit performance. This kind of transparency would allow for real-time adjustments to the scheme.
If SBP has been collecting such data, future iterations can evaluate repayment performance and credit quality to gauge sustainability. For instance, comparing default rates between subsidized and market-rate loans can help calibrate subsidy size, loan terms, or borrower screening criteria.
Three: aim for genuine additionality and lasting change.Let's be honest: before and after MPMG, housing finance hasn't been a real priority for banks. If the scheme is not adding new borrowers and new housing stock, beyond historical trends, it is not a successful scheme. The scheme should help expand access to housing finance and prepare banks to build their housing finance portfolios instead of just rechannelling credit flows temporarily.
More so, mortgage finance should lead to additional housing supply, not just transactions in existing housing. There is evidence that many loans granted under MPMG were supporting already-built projects under construction amnesty, and not new stock.While the PM plans to shut down the Naya Pakistan Housing Development Authority, this is precisely where a strong regulator could ensure that subsidies are tied to new housing projects and that their performance is regularly monitored.
If the growth in housing finance is purely subsidy driven, it will vanish when funding dries up. That is what happened after June 2022 when the MPMG was unceremoniously halted. The real question is: how are banks building capacity to sustain mortgage finance without public money? That's a hard question, but an essential one for the SBP to ask.
Four: ensure the project has institutional backing, rather than a political one. The SBP has to take ownership for a subsidy and housing scheme to have meaningful impact. The current Rs5 billion mark-up subsidy can serve as a pilot, with clearly defined metrics, timelines, and evaluation benchmarks. This can then be scaled up into a lasting program with genuine additionality in mind.
The fact is, while the previous mark-up scheme invites valid criticism and debate over its effectiveness, FY26 presents the SBP with a fresh opportunity to craft a more impactful, data-driven housing finance initiative—one with clear, long-term goals that analysts like us can truly sink our teeth into.