The State Bank of Pakistan (SBP) has made an important move that can make it easier for people to buy or build their own homes. Under the latest housing finance support, banks and other participating financial institutions can provide financing of up to 90 percent of a property’s value. This means a buyer may need to arrange only 10 percent of the total property cost from their own pocket, while the remaining amount can be financed through a bank loan, subject to eligibility and the terms of the scheme.
The decision is aimed at making home ownership more possible for ordinary Pakistanis, especially people who find it difficult to arrange a large down payment. For many families, buying a house has become extremely expensive because property prices and construction costs have increased over the years. Even when people have a stable income, arranging a large amount of money in advance can be a major challenge.
By allowing financing of up to 90 percent of the property value, the banking sector may be able to offer greater support to eligible homebuyers. The move is expected to improve access to housing finance and help more people move closer to their dream of owning a home.
The 90:10 loan-to-value structure is also part of Pakistan’s wider efforts to support affordable housing. Under the government-backed housing finance framework, eligible first-time homeowners can receive financing for buying a house or flat, constructing a house on an already owned plot, or purchasing a plot and building a house on it.
What Does 90 Percent Property Financing Mean?
The new arrangement is simple to understand. If a property has a value of Rs. 1 crore, a bank may provide financing of up to Rs. 90 lakh. The buyer would then generally need to arrange the remaining Rs. 10 lakh as their own contribution.
However, receiving 90 percent financing does not mean that every applicant will automatically get the maximum amount. Banks will still look at several factors before approving a loan. These can include the applicant’s income, repayment ability, credit record, age, employment or business details, and the value of the property.
The actual loan amount can therefore be lower than 90 percent, depending on the applicant’s financial position and the bank’s internal policy.
Still, the biggest benefit of this arrangement is that people may no longer need to arrange a very large down payment. For many middle-class families, saving 20 or 30 percent of a property’s value can take several years. Reducing the required personal contribution to 10 percent can make the process easier for eligible buyers.
A Major Step for First-Time Homebuyers
Buying a first home is often one of the biggest financial goals in a person’s life. Unfortunately, rising land prices, expensive houses and high construction costs have made home ownership difficult for many people in Pakistan.
A large number of families live in rented houses for years because they are unable to arrange enough money to buy property. Even people with regular jobs often face problems when banks require a large initial payment.
The higher financing limit can provide some relief to such families. Instead of arranging a large amount before applying for a loan, eligible buyers may only need to arrange 10 percent of the property value.
This can be especially useful for first-time homeowners who have a stable monthly income but limited savings. The policy focuses on helping people who do not already own a housing unit and are looking to buy or build their first home.
Support Under Affordable Housing Finance
The 90 percent financing structure is linked with Pakistan’s efforts to promote affordable housing. Under the Mera Ghar – Mera Ashiana scheme, first-time homeowners can receive financing for different housing needs.
The scheme covers the purchase of a house or flat, construction of a house on a plot already owned by the applicant, and the purchase of a plot along with construction.
The housing unit size under the scheme is limited to houses of up to five marlas and flats or apartments of up to 1,360 square feet. The financing is available through commercial banks, Islamic banks, microfinance banks and the House Building Finance Company.
The financing structure includes two loan categories. The first category offers loans of up to Rs. 20 lakh, while the second category covers loans above Rs. 20 lakh and up to Rs. 35 lakh. The maximum loan period can be up to 20 years, although the subsidy period is limited under the scheme’s terms.
Why the 90:10 Ratio Matters
The loan-to-value ratio, also known as LTV, is an important part of housing finance. It shows how much of a property’s value can be covered through a loan.
A 90:10 ratio means that the bank can finance up to 90 percent of the approved property value, while the customer contributes the remaining 10 percent.
For example, if an approved property is valued at Rs. 50 lakh, the maximum financing under a 90 percent structure could be Rs. 45 lakh. The buyer would need to arrange the remaining Rs. 5 lakh, along with any other costs that may apply.
The arrangement can reduce the financial burden at the start of the home-buying process. However, applicants should remember that property valuation plays an important role. A bank may finance the loan based on its approved valuation of the property, which may not always be exactly the same as the seller’s asking price.
Therefore, buyers should carefully understand how their bank will calculate the property value before finalising a purchase.
Banks Will Still Check Repayment Capacity
Although the financing limit has increased, banks are not expected to approve loans without checking the borrower’s ability to repay.
The bank will examine the applicant’s financial position and monthly income. It will also consider other loans and financial responsibilities. The purpose is to make sure that the borrower can manage the monthly instalments without facing excessive financial pressure.
Under recent facilitation measures for the housing programme, total monthly payments for housing finance and other consumer loans should not go beyond the specified limit of the applicant’s net disposable income.
This is important because home loans are usually long-term financial commitments. A person may have to make monthly payments for many years. Before applying, customers should carefully calculate their income, household expenses and other financial responsibilities.
Taking the largest possible loan may not always be the best choice. Borrowers should choose an amount that they can comfortably repay even if their personal expenses increase in the future.
Easier Property Assessment Process
The State Bank has also taken steps to make the housing finance process smoother.
For properties with a market value of up to Rs. 50 lakh under the relevant programme, banks and the House Building Finance Company can use their own internal resources to assess the property. Properties with a value above Rs. 50 lakh require assessment by at least one approved valuator.
This may help reduce delays in the approval process, especially for lower-value properties covered by the programme.
The updated instructions also require banks and the House Building Finance Company not to take more than 15 working days for the credit approval process after receiving a complete application with all required information.
For applicants, this can be an important improvement. In the past, lengthy approval processes were often a major concern for people applying for housing finance. Faster processing can help buyers plan their property purchase more effectively.
Benefits for Pakistan’s Property and Construction Sectors
The decision may also support the wider economy.
Housing is closely connected with many other industries. When more houses are built, demand can increase for cement, steel, bricks, paint, electrical equipment, tiles, furniture and many other products.
The construction sector also creates jobs for engineers, architects, masons, plumbers, electricians, painters and daily-wage workers. Because of this connection, growth in housing finance can support business activity in many areas.
The State Bank has previously highlighted the important role of housing and construction in economic development and employment generation.
If more eligible people are able to access bank financing, demand for homes and construction activity could increase. However, the overall impact will also depend on interest rates, property prices, construction costs and people’s ability to repay loans.
What Applicants Should Keep in Mind
People planning to apply for housing finance should not focus only on the 90 percent figure. A loan comes with a long-term financial responsibility.
Before applying, buyers should compare different banks and ask about the markup rate, monthly instalment, loan period, processing requirements, insurance or takaful charges where applicable, legal costs and other possible expenses.
They should also confirm whether the property they want to buy meets the bank’s requirements. The bank may check legal documents, ownership records and approvals from the relevant authorities before financing the property.
Applicants should also remember that the 10 percent contribution is not always the only amount they may need to arrange. There can be other costs linked with buying or registering a property.
These may include taxes, transfer fees, documentation charges and other expenses. The exact amount can depend on the type and location of the property.
Islamic Banks Can Also Participate
The affordable housing programme is not limited to conventional banks. Islamic banks are also included among the participating financial institutions.
This is important for people who prefer Shariah-compliant financing. Eligible applicants can explore the available Islamic housing finance options and compare them with conventional bank products.
Microfinance banks and the House Building Finance Company are also part of the programme, which may give customers more choices when looking for housing finance.
More participating institutions can help improve access to housing finance across different parts of the country.
A Positive Development for Future Homeowners
Allowing banks to finance up to 90 percent of a property’s value is a positive step for eligible Pakistanis who want to own a home but struggle to arrange a large down payment.
The change can make the first stage of buying a home less difficult. Instead of saving a very large percentage of the property price, eligible borrowers may be able to begin with a smaller personal contribution.
At the same time, responsible borrowing remains extremely important. A home loan should be taken only after carefully understanding the monthly payment, markup terms and total financial cost.
People should avoid making decisions based only on the fact that they can receive up to 90 percent financing. The right loan is one that matches a family’s income and long-term financial situation.
With proper planning, the new financing structure can help more Pakistanis move from rented homes towards home ownership. It can also provide support to the construction and property sectors, creating wider economic activity and employment opportunities.
For first-time homebuyers who meet the required conditions, the opportunity to receive up to 90 percent financing could bring the dream of owning a home closer to reality. The policy shows a continued effort to improve access to formal housing finance and make affordable home ownership more possible for ordinary families across Pakistan.
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