The State Bank of Pakistan has issued another circular; for clarifying the restriction being imposed on financing by banks/development financial institutions in Real Estate Sector. The Central Bank said that this directive will not apply on Government housing schemes and plans.

Earlier the State Bank of Pakistan has issued instructions to banks and DFIs to restrict exposure towards lending in real estate sector to 10% of aggregate advances and investments. The Central Bank also insisted on banks for keeping substantial cushion for promoting house financing despite of linking it with advances and investment portfolio of banks excluding investment in government securities. With immediate effect, banks and other financial institutions are also required to set appropriate limits and control for exposure secured by real estate.

The data available at SBP website shows outstanding positions of loans given to real estate amount to around PKR 108.9 billion at the end of November, 2013. Around PKR 54.6 billion credit was also given to borrowers at the end of November, 2013.

Construction companies’ association has criticized the decision made by SBP as it will hinder the revival of construction and housing industry. The senior vice president of the association has said that there is 30% housing demand in larger cities of total housing demand in country. The president also suggest to financial institutions to allocate a limit of minimum 5% their advances and investment their total advances for the housing sector.

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