The Securities and Exchange Commission of Pakistan (SECP) has proposed amendment to Income Tax Ordinance 2001 for reduction in income tax rate on income derived from residential mortgage loans for affordable housing finance in budget (2018-19). The SECP has submitted budget proposals to the government for 2018-19.
According to the SECP, the reduction in income tax rate on income derived by housing finance companies from residential mortgage loans for affordable housing finance has been proposed by the SECP for the middle and low-income groups. It would ensure availability of option for mortgage finance for the middle and low-income groups and low and affordable interest rates may lead to increase in housing finance. It is the commitment towards the financial enhancement in country in light of NFIS and will result in economic drive due to construction and related ancillary business activity.
The SECP said that the housing finance remains severely underdeveloped in Pakistan relative to its size of the population and economy. Pakistan's mortgage to GDP ratio is 0.2 percent compared to South Asia's average of 3.4 percent. At the end of September 2017, there were approximately 69,000 residential mortgage loans outstanding for a consolidated amount of Rs 75 billion (US $730 million).
Mortgage finance for the middle and low-income groups are not available. With the exception of HBFC, most Primary Mortgage Lenders are focusing on high-end resident, mortgages. This is despite significant progress in the financial sector, under the committed leadership of Ministry of Finance, the SECP and the SBP, which has been championing the reforms for financial inclusion for over a decade with significant milestones achieved, including the regulatory framework, credit information, payment, settlement systems and financial literacy. These reforms are inscribed in the National Financial inclusion Strategy, which identifies housing finance as a priority area for government intervention to address the country's housing shortage, the SECP added.
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