Islamabad, Aug 2, 2025: The State Bank of Pakistan (SBP) has increased the housing finance limit for microfinance bank (MFB) customers to Rs. 5 million, effective from August 1, as part of efforts to promote accessible housing in both urban and rural regions.
Back in May 2025, the SBP introduced updated guidelines permitting microfinance bank to provide home loans of up to Rs. 5 million to individuals earning a maximum of Rs. 1.5 million annually after deducting business-related expenses. This move raised the previous cap of Rs. 3 million.
However, these funds are strictly designated for building or upgrading houses and cannot be used for buying land or plots. If the financing includes land, the amount allocated must not surpass 90% of the land’s current market price, and land purchase expenses should be limited to half of the sanctioned loan. The remaining portion must go toward construction.
This revision supports the government drive to offer affordable housing options for low and middle-income families.
READ MORE: Govt Offers Tax Relief on Low-Cost Housing Loans
In a related step, the Economic Coordination Committee recently sanctioned a subsidy on interest rates for 50,000 housing units. This initiative, dsigned in collaboration with the SBP includes an allocation of Rs. 72 billion for the ongoing fiscal period. The proposal is expected to be approved by the federal cabinet and forwarded to banks for execution.
Moreover, authorities have reinstated tax deductions on mortgage loans for the 2025–2026 period.
With the SBP having slashed its policy rate by 1,100 basis points since June 2024, now standing at 11%, housing finance is expected to gain further traction amidst lower inflation.
