Economic coordination committee cuts mortgage rate to 5pc

ISLAMABAD: On the prime minister’s intervention, the Economic Coordination Committee (ECC) slashed the end-user interest rate to 5 per cent from 8pc for Mera Ghar Mera Aashiana (MGMA), a subsidised mortgage financing scheme for low-cost housing, aiming to deliver 500,000 housing units in four years.

A meeting of the ECC presided over by Finance Minister Muhammad Auran­gzeb also approved a Rs6.61bn supplementary grant for Thar Coal Rail Connectivity.

Informed sources at the housing ministry told Dawn that the prime minister had approved the housing mortgage scheme for first-time homeowners in May, with a 5pc interest rate, which was later changed to 8pc for the tier-II scheme of larger housing units and loan amounts touching Rs3.5m during the course of negotiations with the banking sector.

The 5pc interest rate was applicable only to smaller units, mostly flats, while larger units attracted 8pc interest. This did not go well with the PM Office, which directed that the PM’s decision be implemented without any change.

Approves Rs6.61bn for Thar Coal Rail Link

Approves Rs6.61bn for Thar Coal Rail Link

“After due consideration, the ECC appr­oved the revised features of the scheme, including enhancement of the loan limit up to Rs10 million, expansion of eligible housing size parameters, introduction of a uniform 5pc end-user pricing, scaling targets for housing finance over a four-year horizon, continuation of implementation thro­ugh the State Bank of Pakistan mechanism, and adjustment of already disbursed loans to the revised 5pc rate to ensure uniformity”, said the Ministry of Finance (MoF) in a statement after the ECC meeting.

The meeting was told that since its laun­ch in September last year, the scheme had generated a strong public response, with over 10,594 loan applications received and disbursements underway. The committee directed that subsidy payments will be alig­n­ed with actual disbursements and accommodated within annual fiscal allocations.

“The revised framework is aimed at expanding access to affordable housing finance, stimulating construction activity, generating employment, and promoting sustainable home ownership through a balanced risk-sharing and mark-up subsidy model”, it said.

Following SBP’s formal notification on Sept 24, 2025, banks received over 10,594 applications for a loan amount of Rs32.3bn by Feb 13, while 344 loan applications (amounting to Rs810m) had been disbursed, underscoring the need for further facilitation and scaling-up.

The PM Office directed in November that the scheme’s loan and portfolio sizes be aligned with the prime minister’s in-principle approval of May 21, as presented by Planning Minister Ahson Iqbal. The MoF initially resisted, telling the PMO to let the existing scheme continue, as it had been developed through due consultation with all stakeholders, including SBP, Finance Division, banks and the Pakistan Banking Association.

The prime minister called an urgent meeting on Feb 13 to ensure full implementation of the original scheme he had approved in May. Accordingly, several changes were made, including increasing the loan limit to up to Rs10 million, targeting the financing of approximately 500,000 housing units over the next four years, housing units up to 10 marlas/2,720 sq. ft. or flats up to 1,500 sq. ft., and setting a fixed end-user pricing of 5pc.

The ECC also approved a summary of the Ministry of Interior & Narcotics Control regarding the transfer of Rs7.289m as a Technical Supplementary Grant for the ICT component of the project titled “National Programme for Enhancing Command Areas in Barani Areas of Pakistan,” aimed at strengthening agricultural productivity in rain-fed regions.

It also approved a summary submitted by the Railways Division for the provision of a TSG amounting to Rs6.61bn for the Thar Coal Rail Connectivity Project.

Published in Dawn, February 28th, 2026

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