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Success of subsidised home finance scheme linked to key land reforms

July 31, 2025

Ayesha Saba

Digitisation of land records, legal clarity on property titles, and regulatory oversight on developers are the crucial reforms necessary to be carried out before launching subsidised housing finance schemes to ensure targeted benefits and avoid distortions.

In a renewed effort to expand homeownership and stimulate Pakistan’s struggling real estate and construction sectors, the government is set to roll out a fresh subsidised housing finance scheme during the current financial year (FY26). A subsidy of Rs5 billion will be allocated to provide partial markup relief, with the programme being overseen by the State Bank of Pakistan.

Speaking to WealthPK, Ali Hassan, a property law specialist, believes this scheme comes at a crucial time when the real estate and construction industries are facing stagnation due to high interest rates and reduced purchasing power among consumers.

“SBP is aiming to reduce the cost of borrowing for low-income households, which could unlock significant pent-up demand in the housing sector,” he noted. “The move is also expected to generate multiplier effects in related industries such as cement, steel, bricks, and furniture, creating jobs and supporting small and medium enterprises.”

However, Hassan cautioned that without accompanying reforms, such as digitisation of land records, legal clarity on property titles, and regulatory oversight on developers, the scheme may not deliver its full potential. “Housing finance schemes have often stumbled in the past due to governance issues. If these structural gaps aren’t addressed, the scheme could fall short of expectations,” he warned.

An official from the National Affordable Housing Development Authority, also known as  Naya Pakistan Housing and Development Authority (NAPHDA), told WealthPK on condition of anonymity that the authority aims to collaborate with development entities and authorities to provide low-cost housing across Pakistan.

To promote affordability in the housing sector, a series of targeted measures will be implemented to cap housing prices for low- and middle-income groups. Development authorities will be assigned responsibility for land development and construction activities, supported by financial institutions through dedicated housing finance mechanisms, the official said.

In addition, the official said NAPHDA will extend a direct cost subsidy of Rs300,000 to eligible applicants registered under the Naya Pakistan Housing Programme (NPHP). “NAPHDA will also collaborate with relevant government departments to ensure the provision of essential infrastructure — roads, water supply, and sanitation — at designated project sites.”

“To further support low-income beneficiaries, the authority will facilitate access to mortgage financing by establishing partnerships with banks and other financial service providers. Moreover, projects approved under NAPHDA will be eligible for a 90% tax rebate, providing significant incentives to developers involved in affordable housing initiatives.”

Credit: INP-WealthPk