ISLAMABAD Oct 28: The Securities and Exchange Commission of Pakistan on Friday announced major changes in the prudential regulations for non-banking finance companies (NBFCs) licensed to conduct housing finance, by modifying a part dealing with housing finance for individual borrowers.

Under a significant revision, the maximum limit of loan has been raised from Rs7.5 million to Rs20 million. In order to benefit customers, the NBFCs were allowed to advance loans to customers where all the instalments of consumer loans obtained by any customer can go up to 60 per cent of that customer’s net disposable income.

Furthermore, loans can be advanced for the purchase of new piece of land, construction of houses or renovation of an existing house against the security of land/plot, already owned by their customer.

The maximum tenure of such loans is set to 20 years at a debt-to-equity ratio of 85:15.

Simultaneously, the SECP asked the NBFCs to either engage professional expertise or arrange sufficient training for their officials to evaluate the property and assess genuineness and integrity of the title documents. The NBFCs were also encouraged to develop floating rate products for better interest rate management and to stress test their portfolio for adverse changes in interest rates.

The SECP also directed the NBFCs’ management to put in place a mechanism to monitor conditions in the real estate market, at least on a quarterly basis, to ensure that their policies were aligned to current market conditions.

The new changes would not only benefit NBFCs dealing in housing finance, but would also channel customer savings into creating a productive asset for themselves. The decision would also help in the development of the housing finance sector.