By Staff Reporter
ISLAMABAD: The government has decided in principle to grant commercial banks expanded powers to seize and sell mortgaged homes after a cumulative 90-day notice period in the event of default, part of a broader effort to revive lending to the country’s chronically underdeveloped housing sector.
The proposed amendments to the Financial Institutions (Recovery of Finances) Ordinance, 2001, are currently under review by the National Assembly’s Standing Committee on Finance and Revenue. They would allow a financial institution to issue three successive 30-day notices demanding repayment of outstanding mortgage amounts. If the borrower remains in default after the final notice has been duly served, the bank could proceed with the sale of the property.
The committee, which met in Islamabad on Thursday under the chairmanship of former finance minister Syed Naveed Qamar, expressed serious reservations about provisions that appear to tilt heavily in favor of lenders. In a written statement issued after the meeting, the panel said it was concerned that the changes could grant banks “excessive powers in the foreclosure process.”
While members acknowledged the need for an effective legal framework to promote mortgage financing and protect lenders’ interests, they stressed that adequate safeguards and due process must be in place to shield borrowers from arbitrary action. After extended deliberations, the committee deferred consideration of the bill to its next meeting and directed the secretary of the Ministry of Housing and Works to circulate a revised draft to all members for further input.
Qamar told the committee that affordable housing finance must genuinely serve low-income families through transparent, accountable and inclusive mechanisms. He underscored the urgency of enacting robust foreclosure and recovery laws to strengthen Pakistan’s mortgage sector, which remains one of the smallest in the region relative to the size of the economy.
Federal secretaries from the ministries of finance, housing and works, and law and justice briefed the committee on the Prime Minister Apna Ghar Programme, or PM-AGP, the government’s flagship subsidized housing initiative, along with related reforms to housing finance and foreclosure rules. The secretary of the housing ministry, Captain (retd) Mehmood Ahmad, described the PM-AGP as a subsidized financing scheme designed to help low- and middle-income families buy homes while stimulating economic activity and the construction industry. Approved in August 2025 and revised in March 2026, the program offers first-time homeowners financing of up to Rs10 million at a fixed markup rate of 5 percent, with repayment over 20 years on a 90:10 debt-to-equity ratio.
As of April 30, 2026, the program had received 25,304 applications. Of those, 8,990 involving Rs37.154 billion had been approved, and Rs5.071 billion had been disbursed to 1,845 beneficiaries. Pakistan’s housing finance sector remains strikingly small. Mortgage lending accounts for just 0.3 percent of gross domestic product and 0.56 percent of total private-sector credit. The government has set an ambitious target of financing 500,000 housing units over the next four years, which would require an estimated Rs3.2 trillion in new lending.
Responding to questions from lawmakers, Finance Secretary Imdadullah Bosal said the government does not have Rs3.2 trillion in available fiscal space but would arrange the necessary funding through various adjustments given the prime minister’s priority on the program. He added that all subsidy schemes would need review and that the Public Sector Development Programme might have to be curtailed further if required.
Officials from the government team repeatedly emphasized that reforms to foreclosure and recovery laws are essential to reduce risk for banks, restore investor confidence and put the mortgage market on a sustainable growth path. The committee noted that the sector’s structural weaknesses — including weak enforcement mechanisms — have long deterred banks from expanding mortgage books. Lawmakers also voiced concern about the limited reach of housing finance to low-income and marginalized communities, especially in rural and underserved areas, and questioned whether banks and financial institutions currently have the institutional capacity to meet the 500,000-unit target within four years.
In its recommendations, the panel called on the government and the State Bank of Pakistan to introduce simplified financing procedures, more flexible eligibility criteria and enhanced subsidy support targeted at low-income and informal-sector households to improve access and affordability. The law secretary informed the committee that the proposed legislation — formally titled the Financial Institutions (Recovery of Finance) Amendment Act, 2026 — incorporates several changes based on stakeholder feedback. A new Section 15A has been inserted to deal specifically with housing finance rather than applying general mortgage provisions across the board. The revised draft extends the notice period to three successive 30-day notices before any further action can be taken. It also includes a new proviso allowing financial institutions, at any stage before the sale of the property, to reschedule, restructure or settle the outstanding liabilities. According to the law secretary, the amendments are intended to deliver timely recovery for lenders while ensuring fair treatment of borrowers, effective enforcement of secured interests, and greater efficiency and transparency in the overall process. The committee will take up the revised draft at its next sitting.
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