ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has directed the Modaraba companies to extend housing finance facilities to its customers within the category of individuals with a maximum limit of Rs20 million.
The SECP has issued regulations for housing finance for individuals under the Modaraba Regulations, 2021.
According to the SECP regulations, Modarabas with the prior approval of the SECP Registrar may extend housing finance facilities to its customers and the maximum per party limit in respect of housing finance by a Modaraba shall be Rs20 million.
In case of housing finance services, a Modaraba shall determine the housing finance limit, both in urban and rural areas, in accordance with its internal credit policy, credit worthiness and repayment capacity of the customers.
In case of housing finance to an individual, ensure that the total monthly amortized payment of all finance inclusive of housing finance shall not exceed 50 percent of the net disposable income of the prospective customer and, a Modaraba shall not provide finance for purchase of land/plots only.
All housing finance shall be extended for the purchase of land/plot and/or construction thereupon.
The sanctioned finance limit, assessed on the basis of repayment capacity of the customer, value of land/plot and cost of construction on it etc, shall be disbursed in tranches, i.e. up to a maximum of 50 percent of the finance limit can be disbursed for the purchase of land/plot, and the remaining amount be disbursed for construction thereupon.
The Modaraba shall take a realistic construction schedule from the customer before allowing disbursement of the initial finance limit for the purchase of land/plot, the SECP said.
Provided that a Modaraba may provide housing finance for construction of houses against the security of land/plot already owned by their customers provided, that the Modaraba shall ensure that the finance is utilised strictly for the construction purpose.
The maximum Loan-to-Value ratio shall not be more than 85 percent.
The Modaraba may extend finance up to any tenor up to 20 years, subject to a maximum tenor that corresponds with the customer achieving the age of 60 as defined in its duly approved credit policy and keeping in view the maturity profile of its assets and liabilities and it would ensure that a charge is created over every property financed by it by way of an equitable or registered mortgage.
The Modaraba may either engage professional expertise or arrange sufficient training for their concerned officials to evaluate the property, assess the genuineness and integrity of the title documents, etc, and devise a mechanism to monitor conditions in the real estate market (or other relevant product market) and ensure that its policies are aligned to current market conditions.
The Modaraba companies may arrange for the Takaful of mortgaged property from approved Takaful companies, to the extent of the finance, the SECP added.
Copyright Business Recorder, 2021