Most people in the world earn to accomplish their goal of building their own home and home financing tends to help such people. As the name suggests, house financing refers to the monetary assistance in the form of a loan or mortgage for buying a house or land. It is generally provided by financial institutions i.e., banks and, the borrower has to repay the amount of the home loan or mortgage within a certain period. In this case, the collateral is generally the land or house purchased with the money given under the name of home financing. On the other hand, Islamic House Financing is a Shariah Compliant method of house financing based on the principle of “Diminishing Musharkah”. Islamic House Financing is Riba-free. Both of these terms seem to resemble a lot but in reality, are entirely different in nature and principle. Let’s see how these two vary from each other by comparing the following aspects;
Working Principle:
The conventional home financing method simply works by providing home loans, with a specific amount of interest on the repayment of the loan in the form of installments within a specific time.
On the contrary, the concept of interest-based loans is forbidden in Islam. Therefore, Islamic home financing works through the Diminishing Musharkah principle according to which you become the joint owner of your desired house along with the Islamic bank, in most cases. You have to pay a monthly amount as rent to the bank until you cover the complete investment. After that, the ownership is transferred to your name.
Nature:
Conventional home finance is always treated as a loan because it involves a fixed or variable rate of interest whereas Islamic home finance is a riba (interest) free procedure in which the bank or institution purchases the property for the customer and co-owns it with him. The customer pays the amount of property in installments until he becomes the sole owner.
The concept of borrower and lender:
In the conventional home finance system, the financial institute of a bank that lends money is the lender, and the person to whom it is lending the money is the borrower. The borrower has to bear all the risks on its own and the only concern of the lender is the repayment of the loan as well as the interest amount.
There is no concept of borrower or lender in the case of Islamic financing as both the home finance providing institute (bank) and the person seeking home finance become the joint owner of the property. Both the co-owners have the right to use the property. Both the owners share the profits, risks, and losses equally.
Contribution of Naya Pakistan Housing Project
The Prime Minister, Imran Khan created this flagship with the ultimate goal to provide housing to those who are not able to afford it. To serve the purpose widely, Naya Pakistan Housing Project collaborated with banks and launched a home financing facility under the name Mera Pakistan Mera Ghar which works to provide homes to low-wage earners. This scheme will also be providing subsidized loans for the construction of houses. To cater to every segment of the nation, this facility is made available in both conventional and Islamic approaches. The Prime Minister also approved Rs 100 billion for the project considering it will cause a boom in the property market. By the end of December, the disbursement under this project has reached around Rs. 38 billion.
Benefits of Mera Pakistan Mera Ghar:
- A large number of people from the low-income class will be able to construct their own houses.
- This scheme also consists of the Islamic mode of home financing which follows all the Shariah guidelines, drawing the attention of more people. Hence a huge amount of people are expected to get benefit from this facility.
- MPMG is also providing home loans for the construction of houses making construction a feasible thing.
- This initiative will also be profitable for the construction industry. More construction means more raw material, which in turn means profit to the construction industry.
- Overall, this project will help in strengthening the economy.
- The property sector will be promoted at a greater level and more customer-base will be drawn to it.
How to avail of the MPMG facilities:
This project has been operating in association with the State Bank of Pakistan and many commercial banks. If you desire to avail of the Mera Pakistan Mera Ghar facility or want to know more details about it, you can contact your nearest bank.
Eligibility Criteria:
- You must be a valid CNIC holder.
- This facility is valid for the person who is going to purchase a house for the first time.
- This facility can only be availed once.
For more information, you can visit the NPHP website www.nphp.com.pk
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