By Staff Reporter
ISLAMABAD: The Economic Coordination Committee of the cabinet cut the interest rate for its main subsidised mortgage program to a uniform 5 percent, heeding a direct call from the prime minister to make home loans more affordable for a wider range of buyers.
The move, approved at a meeting chaired by Finance Minister Muhammad Aurangzeb on Friday, raises the maximum loan size to Rs10 million and sets a goal of financing roughly 500,000 housing units over the next four years under the Mera Ghar Mera Aashiana scheme.
The revisions resolve earlier tensions over the program’s terms. The prime minister approved the initiative in May with a 5 percent rate. During subsequent talks with lenders, it evolved into a tiered structure: 5 per cent for smaller units and 8 per cent for larger ones with loans up to Rs3.5 million. The PM’s office pushed back, insisting on sticking to the original uniform rate.
After reviewing the proposal from the Ministry of Housing and Works, the ECC endorsed an expanded version that includes bigger eligible properties — units up to 10 marlas or 2,720 square feet, and flats up to 1,500 square feet — along with adjustments to bring already-disbursed loans in line with the new 5 per cent rate.
“After due consideration, the ECC approved the revised features of the scheme, including enhancement of the loan limit up to Rs10 million, expansion of eligible housing size parameters, introduction of a uniform 5pc end-user pricing, scaling targets for housing finance over a four-year horizon, continuation of implementation through the State Bank of Pakistan mechanism, and adjustment of already disbursed loans to the revised 5pc rate to ensure uniformity,” the Ministry of Finance said.
The program, launched in September, has drawn strong interest from the public. By Feb. 13, banks had received more than 10,594 applications seeking Rs32.3 billion in loans. Of those, 344 had been approved and disbursed, totaling Rs810 million. Subsidy payments will now be calibrated to match actual disbursements and contained within yearly fiscal budgets, the committee said.
The updated approach is designed to expand access to affordable housing finance, stimulate construction, generate employment and foster sustainable home ownership through a balanced risk-sharing and mark-up subsidy model, the ministry added.
The push for changes intensified after the PM’s office in November directed that loan and portfolio sizes align with the original May 21 approval presented by Planning Minister Ahson Iqbal. The finance ministry had argued for keeping the version developed after broad stakeholder consultations, including with the State Bank and banking industry. The prime minister held an urgent meeting on Feb. 13 to ensure the scheme matched his initial vision.
The ECC also signed off on other items. It approved a Rs6.61 billion technical supplementary grant for the Thar Coal Rail Connectivity Project, which will help move local coal to power stations and factories, bolstering energy security and reducing dependence on imports.In addition, the panel backed the transfer of Rs7.289 million for the information and communications technology part of a national program to improve command areas in Pakistan’s barani, or rain-fed, regions to lift farm output.
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