Pakistan's central bank announced five regulatory measures as incentives for banks to boost financing for low-cost and affordable housing.

Under the State Bank of Pakistan's regulations announced Nov. 20, the value of housing units considered low cost was increased to 3.5 million Pakistani rupees from 3 million rupees, with the loan size cap hiked to 3.2 million rupees from 2.7 million rupees.

The central bank also urged banks to use alternative methods in identifying income sources and assessing the creditworthiness of borrowers generating income from informal sources.

Banks usually obtain documentary evidence of income or utilize repayment surrogates like rent and utility bills to assess the repayment capacity of borrower. The move to exempt banks from using verifiable income for calculating the debt burden ratio expands the eligibility requirements for potential borrowers and allow more people from the low-income segments to avail of financing.

Banks are also no longer required to use the Internal Credit Risk Rating System for low-cost housing finance until Sept. 30, 2022. Accordingly, borrowers who cannot access financing because of the criteria can now avail of financing if the bank is satisfied with the borrower's qualifications.

Lastly, lenders can extend housing finance for the purchase or construction of a residential property to borrowers who have liquid securities or already owns a housing unit. The financing bank will then be able to create its lien on existing residential property or liquid securities in addition to the residential property mortgage that is being financed.

The central bank reiterated that banks are required to have least 5% of their private-sector advances as housing and construction finance by Dec. 31, 2021.

As of Nov. 20, US$1 was equivalent to 160.62 Pakistani rupees.