Pursuing an opportunity to build one's own home is arguably the aspiration of every individual, but one must also remain aware of how exhausting and restrictive this particular endeavour can be. As hopeful as one may be, building one's own house in a developing country, such as Pakistan, can be emotionally and financially draining. The entire process raises unlimited desires and wants, even though the resources to accomplish and fulfil them may be in limited supply. To boot, it is estimated that Pakistan is presently facing a housing backlog of approximately 10.3 million housing units, one that is likely to increase to 17.2 million housing units by 2025 in light of population growth. In cognisance of budgetary constraints, it is imperative for individuals to prioritise their needs and then prudently raise capital so as to construct their dream homes.
Fortunately, to compensate for capital shortages, a number of options for financing of construction endeavours are available in Pakistan. To this effect, a number of commercial banks offer products, related to construction and housing finance, with reasonable mark-ups and repayment schedules. Additionally, the Government of Pakistan, led by the Pakistan Tehreek-e-Insaaf, has been striving to position its resources to fast-track economic development in the country, with a particular focus on the sectors within the construction industry, especially in the context of making financing readily available for construction and home ownership. For reference, a non-exhaustive selection of such financing options is also detailed below.
Naya Pakistan Housing Scheme
As stated in its Mission Statement, the Naya Pakistan Housing Scheme strives to close the widening housing shortages faced by the citizens and residents of Pakistan. In addition, it seeks to stimulate the businesses of all professions and sectors within the construction industry, including, but not limited to, builders, contractors, developers and suppliers. With a focus on low-cost and low-income housing segment, NPHS aspires to resolve finance and supply-side issues. Its three tiers of loans are:
⦿ Financing up to 2.7 Million & Tenure up to 20 Years to Purchase Flat or House up to 5 Marla.
⦿ Financing up to 3.0 Million & Tenure up to 20 Years to Construct Flat or House up to 5 Marla.
⦿ Financing up to 5.0 Million & Tenure up to 20 Years to Construct or Purchase Flat or House.
Bank Alfalah Limited
Bank Alfalah Limited offers products related to Home Finance with floating and variable markup options. The markup comprises 1 Year KIBOR in addition to 3.5% P.A. for Local Salaried Customers and 4.5% P.A. for Other Customer Segments, with a possibility to obtain financing for up to 50% of the value of the property. These are further characterised by flexible loan tenures ranging from a minimum of 3 Years and a maximum of 25 Years. The instalments for Year 1 are taken in advance, whereas the remaining instalments are distributed across the tenure of the financing as per the Repayment Schedule. To ensure the integrity and security of its customers' investments, and the loan it provides, Bank Alfalah Limited only approves financing for properties in areas that are free of litigation and regulatory objections, and boasting good prospects and value.
Faysal Bank Limited
Faysal Bank Limited offers its products vis-a-vis Home Finance on Diminishing Musharakah, that cater to construction, purchase and renovation. The tenures for construction and purchase range from a minimum of 1 Year to a maximum of 20 Years, whereas the tenures for renovation range from a minimum of 2 Years to a maximum of 15 Years. In particular, Faysal Bank Limited takes pride in requiring the least possible documentation and ensuring swift processing of all loan applications.
Habib Bank Limited
Habib Bank Limited offers Shariah-compliant Home Finance facilities and products. These are designed to be affordable and convenient so as to facilitate customers in constructing or purchasing their dream homes, and making payments through easy and manageable monthly instalments. With tenures ranging from a minimum of 3 Years to a maximum of 25 Years, individuals may obtain financing for up to 70% of the value of the property, and either purchase an already constructed house, or purchase a piece of land and subsequently construct upon it. The markups range from 1 Year KIBOR + 3% P.A. to 1 Year KIBOR + 4% P.A. depending of the categorisation of the individual: an Existing Customer or a New Customer; and as Local Salaried Customer, Self-Employed Businessperson, or Self-Employed Professional; or Non-Resident Salaried Person.
MCB Bank Limited
MCB Bank Limited offers a variety of products vis-a-vis Home Finance, each at competitive markups and flexible tenures, ranging from a minimum of 2 Years to a maximum of 25 Years. These are particularly geared towards catering to a specialised segment of the populace, comprising children of martyrs, differently-abled persons, transgenders, and widows, alongside the financing through the Government of Pakistan's Markup Subsidy Schemes. For Local Salaried Customers, the markups are contingent upon the extent of financing being sought: 6 Months KIBOR + 2% P.A. where financing is for up to 30% of the value of the property; 6 Months KIBOR + 1.50% P.A. where financing is for between 30% and 50% of the value of the property; and 6 Months KIBOR + 1% P.A. where financing is for equal to or more than 50% of the value of the property. Similarly, for Self-Employed Businesspersons and Self-Employed Professionals, the markups vary based on the exact proportion of the property's value that is to be financed by the bank: 6 Months KIBOR + 2.5% P.A. where financing is for up to 30% of the value of the property; 6 Months KIBOR + 2% P.A. where financing is for between 30% and 50% of the value of the property; and 6 Months KIBOR + 1.5% P.A. where financing is for equal to or more than 50% of the value of the property.
Meezan Bank Limited
In cognisance of the difficulties households and individuals face in independently saving enough capital to construct or purchase their dream homes, Meezan Bank Limited offers interest-free products based on Diminishing Musharakah. Under this, ownership is initially shared by the bank and the customer, and the ownership is steadily transferred to the customer upon payment of the monthly instalments. As the customer's shares increase, the Repayment Schedule simultaneously becomes more and more manageable. The financing, which is offered for construction, purchase, and renovation, is offered at a markup of 10.95% P.A. with Fixed Rate for 5 Years, and at 11.45% P.A. with Fixed Rate for 10 Years. For Local Salaried Customers, after the Fixed Rate Tenure, Re-Pricing results in 1 Year KIBOR + 3% P.A., whereas for Self-Employed Businesspersons and Self-Employed Professionals, after the Fixed Rate Tenure, Re-Pricing results in 1 Year KIBOR + 4% P.A.
In essence, in the face of crippling inflation and the globalisation of expenditures, many households and individuals probably worry about their ability to autonomously construct or purchase a home. However, with caution and after thorough research, they may now select from a multitude of options that certainly make it more possible to become a home-owner. In any case, it is important for individuals to read and understand the fine-print and the terms so as to make an informed decision and be fully aware of their responsibilities and rights. It is better to be careful in advance than to be disappointed and surprised later.