House Leasing Finance Structure in Pakistan

Leasing 13/03/2018

Owning a house is nothing short of a dream of almost everyone!

In the last decade or so, the real estate sector has been on an upward trend which is the reason why it has nearly become impossible for a person belonging to a middle class to buy a home. However, leasing is an option that can help you make this dream come to life. In Pakistan, there are different financial institutions offering house lease financing services.

Besides commercial banks, House Building Finance Company Limited provides lease financing to middle and low-income households. Jointly owned by State Bank of Pakistan and the Government of Pakistan, House Building Finance Company Limited provides financing facilities for renovation, construction, reconstruction, and purchase of houses. This institution has laid a proper leasing structure in the country that other banks also follow.

The lease plan in Pakistan can be acquired for three to twenty years depending on the income of the applicant. The title of ownership is divided into units which have to be purchased on a monthly basis and after all the units have been purchased, the clear title to the property is provided. Let’s discuss this whole leasing structure in detail.

Eligibility Criteria

Age

The minimum age of the applicant is 18 years and maximum 60 years. In case of self-employed individuals, the maximum age is 65 years.

Income

The applicant should be employed and should have sufficient income to meet the investment obligations. The proof of income (tax returns or salary slips) should be provided with the application.

Property

In case of construction or reconstruction, the proof of ownership of land or existing house should be submitted with the details of the construction requirements.

Purchase of House

If the application is for the purchase of a house, the current owner should have a clear title to the property. Furthermore, the house or apartment should not be more than 45 years old. The house purchase facility is only available in urban areas where all the basic amenities of life are available.

Down Payment

The down payment is 30% of the total value of the property.

Loan Repayment

The total amount of loan is divided into monthly payments comprising of two components:

  • For the use of home
  • Equity share (Capital repayment)

The monthly rentals start decreasing as the amount of loan is paid back. When the whole amount of loan is repaid, the applicant becomes the sole owner of the property and the title is transferred completely to the customer.

Units in House Leasing System

If you apply for a house loan from any financial institution, you will hear a lot about units. Not many people know what actually units are. Units are basically the title of ownership divided into several parts and assigned an amount. The customer acquiring a loan should purchase all the units on monthly basis, the amount of which is already added to the monthly lease payment, to get the title to the property.

Pros and Cons of House Leasing

Just like other types of financing, house leasing has its own advantages and disadvantages. We will discuss them both to help you make up your mind.

Pros

  • One of the top benefits of house leasing is that after paying the lease amount, you will have your own home. With a rental house, it is not possible.
  • The number of installments decrease gradually and seems like you are paying the rent of your home.
  • Upon completion, the title is transferred without any delay.

Cons

  • You have to make the down payment.
  • If the lease term is short, the number of lease payments will be higher.

A Final Word

From the above discussion, we conclude that acquiring a home through house leasing can be a good choice. Not only will it help you save you the hassle of living in a rental home, but offer you peace of mind and your OWN home as well upon the completion of the lease term. You should make use of this facility if you have sufficient income and want to buy your own home; no other option is as suitable as house leasing.

In order to apply for a loan, you should have a house in mind that you can mention in your loan application. At ilaan.com, there are various houses for sale to choose from. Browse now and get hold of an extensive range of affordable properties in your city!