Development & Policy Desk | June 2026 | 5 min read
| ⚡ Quick Takeaways
• The World Bank has approved restructuring of the $190.24 million Pakistan Housing Finance Project (PHFP), expanding its Risk Sharing Facility to cover all low- and middle-income housing finance — not just government-scheme loans. • The restructuring follows the 2022 suspension of the Mera Pakistan Mera Ghar (MPMG) subsidised mortgage programme, which significantly slowed mortgage origination during 2022–24. • Since becoming operational, PMRC has extended average mortgage tenors by five years and reduced borrowing costs by 3–4 percentage points for low-income borrowers. • The RSF has already been leveraged tenfold — covering a $100 million mortgage portfolio from its existing capital base — but the World Bank says the facility remains underutilised. • Project targets have been revised: 25,000 PMRC-refinanced mortgages by June 2026, and an RSF portfolio coverage target of approximately $182 million. |
Pakistan’s housing finance market has historically been one of the most underdeveloped in the region, with mortgage lending at just 0.25 percent of GDP. The $190 million World Bank project approved in 2018 was designed to change that — and despite significant setbacks from the suspension of a key government housing programme and a macroeconomic crisis, it has delivered meaningful results. The restructuring adapts the project’s tools to current conditions as falling interest rates open a new window for mortgage market growth.
| $190M
World Bank Project Value |
10x
RSF Leverage Achieved |
0.25%
Pakistan Mortgages as % of GDP |
What the Restructuring Changes
The core change is an expansion of the Risk Sharing Facility’s eligibility criteria. Previously, the RSF primarily covered mortgages originated under government-backed schemes — specifically the Mera Pakistan Mera Ghar programme. With MPMG suspended since 2022, the RSF’s potential borrower base was effectively frozen. The restructuring broadens coverage to all categories of low- and middle-income housing finance, regardless of whether the mortgage was originated under a government scheme.
The facility will also extend coverage to loans originated under the newly announced Mera Ghar-Mera Ashiana housing initiative — giving the government’s latest housing effort an immediate risk-mitigation infrastructure to work with. The World Bank notes that the RSF’s existing capital base is currently underutilised, with the portfolio under coverage roughly equal to its capitalisation. Broadening eligibility is intended to put that capital to more productive use at a time when declining interest rates are bringing mortgage borrowers back into the market.
Revised Project Targets Post-Restructuring
| Target | Original | Revised |
| Mortgages refinanced by PMRC | Higher (pre-MPMG suspension) | 25,000 by June 2026 |
| RSF portfolio coverage | Pre-cancellation figure | ~$182 million |
| RSF capitalisation increment | $30 million additional planned | Cancelled — macroeconomic crisis |
| Eligible borrowers | MPMG-linked loans only | All low- and middle-income housing finance |
What PMRC Has Achieved and Why It Matters
The Pakistan Mortgage Refinance Company — the project’s central institutional vehicle — has delivered concrete improvements in mortgage market conditions since becoming operational. Average mortgage tenors have increased by five years, which significantly reduces monthly repayment amounts and makes homeownership accessible to a wider income range. Borrowing costs have come down by three to four percentage points, a meaningful reduction when base rates in Pakistan have historically been high. These are not marginal improvements — they represent a structural shift in what mortgages look like for the end borrower.
On the funding side, the PMRC has used World Bank-backed subordinated debt to leverage an additional $69.4 million from Pakistan’s domestic capital markets — demonstrating that institutional investment in housing finance is commercially viable when the right risk-mitigation structures are in place. The IFC’s decision to take a $3.1 million equity stake in 2020 added further private sector validation. The project also helped open housing lending to microfinance institutions and facilitated the emergence of private housing finance companies — broadening the originator ecosystem beyond the traditional commercial bank channel.
PHFP Results: Key Outcomes to Date
| Outcome / Achievement | Result |
| Loan tenor extension (PMRC) | Average +5 years on mortgage tenors |
| Borrowing cost reduction (PMRC) | 3–4 percentage points lower for mortgage borrowers |
| Capital market leverage | World Bank-backed subordinated debt raised $69.4m domestic |
| IFC equity investment | $3.1 million equity stake taken by IFC in 2020 |
| RSF leverage ratio | 10x — $100m mortgage portfolio covered from existing capital |
| PMRC rating (World Bank) | Highly Satisfactory — capital-strengthening component |
| Pakistan mortgage market baseline | 0.25% of GDP — one of lowest in the region |
| MPMG suspension impact | Programme suspended 2022 — significantly slowed 2022–24 originations |
| 📊 Why Mortgages Have Been So Low in Pakistan
At 0.25% of GDP, Pakistan’s mortgage market is among the smallest relative to economic size in South Asia. The structural reasons include high interest rates historically making long-tenor mortgages unaffordable, limited formal property documentation reducing collateral quality, a lack of standardised mortgage products, and absence of a secondary mortgage market. The PHFP has addressed several of these constraints directly — the RSF reduces lender risk, PMRC provides liquidity through refinancing, and the fixed-rate product design addresses borrower uncertainty about future repayments. |
DISCLAIMER: All information in this article is based on publicly available data and official statements. This content is intended for general informational purposes only.
