The federal government has approved revisions to key features of the Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance to further promote affordable housing across Pakistan.

According to a notification issued by the Ministry of Housing and Works, the changes were introduced following approval by the Economic Coordination Committee and later ratified by the federal cabinet.

Under the revised framework, the eligibility criteria remain unchanged. The scheme will continue to be available for first-time homeowners who are Pakistani citizens with valid CNICs and do not own any residential property in their name.

The financing facility covers three main housing purposes: purchasing a house or apartment, constructing a house on an already owned plot, and purchasing a plot followed by construction. The approved property sizes include houses of up to 5 marla and flats or apartments up to 1,500 square feet, as previously agreed under the ECC decision.

A range of financial institutions will participate in the program, including commercial banks, Islamic banks, microfinance banks, and House Building Finance Company Limited (HBFCL).

One of the most significant revisions is the increase in the maximum loan size to Rs. 10 million, while the maximum loan tenure will remain 20 years. The government will provide a markup subsidy for the first 10 years of the financing period.

Under the updated pricing structure, banks will charge one-year KIBOR plus 3 percent, while borrowers will pay a fixed markup rate of 5 percent for both tiers. Previously, Tier-2 borrowers faced a higher markup rate.

The loan-to-value ratio will remain 90:10, meaning 90 percent of the property value will be financed through loans, while borrowers will provide 10 percent equity.

To reduce lending risks, the government will also offer 10 percent risk coverage on the outstanding portfolio on a first-loss basis under the scheme.

The program aims to finance 500,000 housing units over the next four years. The targets include 50,000 units in fiscal year 2025–26, 100,000 units in 2026–27, 150,000 units in 2027–28, and 200,000 units in 2028–29.

The State Bank of Pakistan will serve as the implementing agency in collaboration with the Pakistan Housing Authority-Foundation and participating financial institutions.

The notification also states that existing loans previously issued at an 8 percent markup will now be adjusted to 5 percent to maintain uniformity under the revised policy.

All relevant stakeholders, including the Ministry of Finance, SBP, and participating banks, have been directed to take necessary steps to implement the updated affordable housing scheme.