The federal government has approved revisions to the Markup Subsidy and Risk Sharing Scheme for Affordable Housing Finance in a move aimed at accelerating access to low-cost housing across Pakistan.

According to a notification issued by the Ministry of Housing and Works on Friday, the changes were approved by the Economic Coordination Committee and later endorsed by the federal cabinet.

The revised scheme retains its original eligibility requirements. It will remain available exclusively to first-time homeowners who are Pakistani citizens with valid CNICs and do not own any residential property.

Under the program, financing can be used to purchase a house or apartment, construct a home on an already owned plot, or buy a plot with the intention of building a house later.

The scheme covers housing units of up to 5 marla and apartments or flats measuring up to 1,500 square feet, as approved in the ECC decision.

A range of financial institutions will participate in the initiative, including commercial banks, Islamic banks, microfinance banks, and House Building Finance Company Limited.

Following the revisions, the maximum loan size has been increased to Rs10 million, while the repayment tenure remains up to 20 years. The government will continue to provide a markup subsidy for the first 10 years of the loan.

Banks will price loans at one-year KIBOR plus 3 percent, but borrowers will pay a fixed markup rate of 5 percent for both tiers under the revised structure. Previously, Tier-2 borrowers were charged a higher rate.

The loan-to-value ratio remains 90:10, meaning borrowers will contribute 10 percent equity while banks finance the remaining 90 percent.

To encourage lending, the government will also offer first-loss risk coverage of up to 10 percent of the outstanding portfolio.

The program targets the financing of 500,000 housing units over four years, including 50,000 units in FY2025-26, 100,000 in FY2026-27, 150,000 in FY2027-28, and 200,000 in FY2028-29.

Implementation will be overseen by the State Bank of Pakistan in coordination with the Pakistan Housing Authority Foundation and participating banks.

The notification also states that loans previously disbursed under the scheme at an 8 percent markup will be revised downward to 5 percent to ensure uniform rates for all beneficiaries.

Relevant stakeholders, including the Ministry of Finance, the central bank, and participating financial institutions, have been instructed to take the necessary steps to implement the updated framework.