NAPHDA proposes escrow account for routing payment for the low-cost housing unit

The Naya Pakistan Housing and Development Authority (NAPHDA) has proposed an escrow account for routing all transfers and payments, including the payment of a cost subsidy of Rs300,000 for a low-cost housing unit.

The Economic Coordination Committee (ECC) of the cabinet on Wednesday under the chair of the Federal finance minister will take up the summary of NAPHDA with regard to the cost subsidy for housing units.

The NAPHDA through the cabinet division has submitted new proposals to ECC pertaining to eligibility criteria, modalities for payment of cost subsidy, payment of cost subsidy on beheld of the allottees, and other entities like Workers Welfare Fund.

ELIGIBILITY CRITERIA:

The NAPHDA board last month approved eligibility criteria for Nava Pakistan Housing Program (NPHP).

It excluded unverified, incorrect or blocked CNICs for NPHP. Moreover, only one application per family (which includes applicant, and applicant’s father, mother, spouse and dependent children), as well as only one application per CNIC, is allowed.

In addition, the clearance of NACTA, PTA and participating banks from a bankability [credit worthiness] point of view is also mandatory.

Moreover, NAPHDA shall also obtain the consent of the verified bankable applicants to occupy low-cost housing units at the proposed location and terms and conditions of loan on a prescribed form.

PAYMENT MECHANISM:

As per the details, NAPHDA also proposed an escrow account, maintained with the participating bank or the lead bank – in case of a consortium of banks – which shall be used for routing all transfers and payments, including the payment of cost subsidy Rs300,000 per low-cost-housing unit, to be paid upfront by the government and the amount of down payment paid by the end/user/borrower.

SELECTIONS OF APPLICATIONS:

The NAPHDA will share the list of applicants who fulfil the eligibility criteria as mentioned above, with the bank(s) for their credit assessment.

Subsequently, the bank(s), based on their selection criteria, select applicants for extension of financing and share the list with NAPHDA.

In addition to this, the department will ballot the list of eligible/willing applicants shared by banks to select allottees and share the list back with banks.

Furthermore, The Banks shall process/sign loan agreement(s)/document(s) with eligible applicants (borrowers) for providing a loan equal to the cost of the housing fewer Rs. 300,000 and the amount contributed by the borrower as a down payment.

The Banks (through Lead Bank in case of consortium’ shall provide to NAPHDA, list of the borrowers.

RELEASE OF ACCOUNT

The NAPHDA will submit a Sanction Letter (along with approved applicants/allottee(s) borrowers to the Finance Division for the release of subsidy funds (Rs. 300,000/- per allottee/borrowers].

Finance Division (Expenditure Wing) shall endorse the Sanction Letter to Accountant General Pakistan Revenue (AGPR) subsequently, the AGPR shall issue Sealed Authority of the sanctioned amount in favour of participating bank for Lead Bank in case of consortium) to be credited in the Project Account (Escrow Account).

RELEASE OF PAYMENT FROM THE PROJECT ESCROW ACCOUNT

The NAPHDA shall decide construction milestones along with the schedule of payments to the selected builders and convey the same to the participating bank.

The builder will approach NAPHDA for the release of payment from the escrow account with documentary proof of achievement of the construction milestone, which shall have been verified beforehand by the consultant.

IN CASE OF DEFAULT:

The amount of cost subsidy shall be treated as equity participation for a mortgage in each case, and shall be liable to be repossessed by the federal government in the event of default by the borrower. Similarly, the ownership of under-construction property will be transferred to allottee(s) in case of default of a builder/ developer.

It is pertinent to note that the government will provide Rs 300,000 for each house for the first 100,000 units of the NPHP.

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