ECC okays Rs72b housing subsidy
The government on Friday approved a Rs72 billion subsidy scheme to help low and middle-income groups build small homes and apartments. Beneficiaries can avail housing loans of up to Rs3.5 million at fixed interest rates ranging from 5% to 8%.
The Economic Coordination Committee (ECC) of the Cabinet approved the markup subsidy and risk-sharing scheme. First-time homeowners will receive loans at rates cheaper than those offered in the market. The government will bear Rs62 billion in interest costs and Rs10 billion to share the default risk with banks.
Finance Minister Muhammad Aurangzeb chaired the ECC meeting, which also cleared a series of agenda items concerning industrial growth, environmental policy, skill development, housing finance, and telecommunication.
To ensure the scheme's success and reduce banks' reluctance, the government will enact two key laws. The foreclosure law will soon be tabled in the cabinet, granting banks the right to seize mortgaged properties and the Condominium law will address ownership issues in apartments.
The Housing and Works Ministry presented the scheme based on recommendations from the task force on housing development.
Under the plan, banks will carry 90% of the risk, while the federal government will assume the remaining 10%.
Officials estimate that around 50,000 people will benefit during the current fiscal year, requiring Rs100 billion in loans.
The Pakistan Tehreek-e-Insaf (PTI) government had earlier launched a similar scheme. It benefited 184,000 homeowners, with 62,000 units already completed. The rest are under construction.
Under PTI's Naya Pakistan Housing Programme, around two million people applied for home loans, but banks only extended Rs236 billion in credit.
Housing remains out of reach for most Pakistanis due to double-digit interest rates, even though inflation is around 4.5%. The Economic Policy and Business Development think tank has demanded slashing rates to 6% and ending guaranteed bank profits.
To qualify, applicants must be first-time homeowners with valid identity cards and no property ownership. They can avail loans for up to 20 years. The scheme offers fixed rates of 5% for loans up to Rs2 million and 8% for loans between Rs2 million and Rs3.5 million for the first 10 years. After a decade, market rates will apply, which could reach as high as 15% based on current interest trends.
The scheme supports the purchase or construction of homes up to 5 marlas or apartments up to 1,360 sq ft. Borrowers must contribute 10% of the cost upfront; the remaining 90% will be financed by banks.
Commercial banks, Islamic banks, microfinance banks (MFBs), and the Housing Building Finance Corporation can participate.
The State Bank of Pakistan (SBP) has endorsed the scheme's design for ensuring outreach and adherence to criteria. A full implementation mechanism for the markup subsidy and risk-sharing has also been prepared.
The Pakistan Housing Authority Foundation will manage the programme. The government has decided to dissolve the Naya Pakistan Housing Authority to avoid duplication.
Other decisions
The ECC endorsed a report from the Ministry of Commerce on industrial competitiveness and the export-led growth of the steel sector, aligned with the National Tariff Policy 202530. The goal is to lower production costs and improve export competitiveness.
The Committee approved a summary from the commerce ministry to file a Supreme Court appeal against a Lahore High Court decision granting gas/RLNG tariff concessions to M/s Ghani Glass Ltd. The ECC found the appeal tenable, given that concessionary tariffs for five export sectors have already been withdrawn.
The ECC also approved Pakistan's Green Taxonomy, a proposal by the Ministry of Climate Change and Economic Coordination. The finance minister welcomed the initiative, calling it overdue and vital for enabling green project financing.
To support skills development, the ECC approved a Rs1 billion government guarantee for issuing the Pakistan Skill Impact Bond (PSIB). This was moved by the Ministry of Federal Education and Professional Training.
The committee encouraged the ministry to gradually adopt the public-private partnership model and finance future projects using its own balance sheet, thereby reducing dependence on sovereign guarantees.
The Ministry of Industries and Production briefed the ECC on vegetable ghee and oil pricing trends. Despite adequate national stocks, the Committee expressed concern over weak transmission of limited pass-through of declining international prices to domestic consumers.
It urged close monitoring to avoid price distortions or cartelisation. The ECC emphasised stronger coordination with the Competition Commission of Pakistan, National Price Monitoring Committee (NPMC), and provincial authorities through the Ministry of Industires and Production.
The ECC approved a proposal by the Ministry of Information Technology and Telecommunication to revise charges for Radio-Based Services (RBS). It directed periodic revisions every 3-5 years to reflect economic and technological shifts.
The Committee also endorsed a revised composition of the advisory panel overseeing the release of IMT spectrum, crucial for expanding mobile broadband in Pakistan.
Finally, the ECC formally declared ship breaking and recycling as an industry, based on recommendations by the Ministry of Maritime Affairs. However, the ministry was asked to work with the Power Division to provide data on energy usage in the sector to enable accurate assessment of the implications of applying industrial power tariffs in place of the existing commercial rates.
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