SBP overhauls housing finance rules, sets 30-year maximum tenor

August 18, 2026 (MLN): The State Bank of Pakistan (SBP) has comprehensively reviewed and updated the Prudential Regulations for Housing Finance, considering the current dynamics of the housing finance sector.

The revised regulations supersede IH&SMEFD Circular Letter No. 8 of 2019, IH&SMEFD Circular No. 12 of 2020, IH&SMEFD Circular No. 13 of 2020, and IH&SMEFD Circular No. 07 of 2021.

The revised regulations are applicable with immediate effect, and banks/DFIs have been advised to ensure meticulous compliance with the enclosed regulations.

Under the revised framework, housing finance may be extended for purchase of a house or apartment, construction on an owned plot, purchase of a plot with construction, extension or expansion of an existing house, renovation, and installation of renewable-energy solutions in housing units.

The maximum tenor for housing finance has been set at 30 years, while renewable-energy financing carries a maximum tenor of 10 years. The maximum Loan-to-Value (LTV) ratio stands at 90:10.

Total monthly amortization payments covering the housing finance under consideration along with all other outstanding consumer-financing obligations must not exceed 65% of the borrower's net disposable income.

Banks/DFIs have also been directed to use the informal-income estimation (proxy) models circulated by the Pakistan Banks' Association for assessing informal-income borrowers.

For financing up to Rs5 million, banks/DFIs may extend loans by marking a lien on the property, including against a Green Property Certificate issued by the Punjab Land Records Authority or an equivalent certificate from the relevant provincial authority.

Property assessment by a PBA-panel valuator has been made mandatory for financing above Rs10 million.

Banks/DFIs have also been directed to obtain comprehensive insurance/takaful coverage of the financed housing unit and to use standardized financing documents circulated by the PBA, with digital signatures verified through OTP or other two-factor authentication.

On asset classification, the regulations prescribe a four-tier framework OAEM, Substandard, Doubtful, and Loss based on overdue periods of 90 days, 180 days, one year, and two years respectively, with provisioning requirements benchmarked against IFRS-9 Expected Credit Loss or Forced Sale Value-based calculations, whichever is higher.

The Forced Sale Value benefit will cease after five years from the date of classification.

Rescheduling or restructuring of housing finance has been capped at once within any two-year period, with a maximum tenure extension of five years, subject to the overall 30-year ceiling.

The regulations also require banks/DFIs to adopt simplified, standardized loan application forms for formal salaried persons, formal businesses, and informal-income persons made available in both physical and digital formats, in Urdu and English.

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