Housing finance scheme raises constitutional concerns

Pakistan’s recently announced Rs3.2 trillion housing finance scheme has come under scrutiny over what experts describe as a significant constitutional contradiction, as it involves interest-based lending despite a binding deadline to eliminate interest from the country’s financial system by January 1, 2028.

According to official sources, the structure and duration of the scheme appear to conflict with constitutional requirements. The government has unveiled a five-year financing plan, allocating Rs321 billion in the first year alone to support the construction of 50,000 houses. The total projected cost over five years stands at Rs3.2 trillion.

However, analysts point out that the continuation of interest-based loans beyond 2028 directly contradicts the constitutional mandate to phase out interest. Additionally, each loan under the scheme is set to be repaid over a 20-year period, meaning that loans issued close to or after the deadline would still involve interest payments for decades.

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The scheme further includes a fixed markup rate of 5 percent for the first 10 years, after which market-based rates will apply. Critics argue that this not only sustains the interest-based banking system but also expands its scope, raising concerns about compliance with constitutional principles.

The programme, launched by Prime Minister Shehbaz Sharif under the “Apna Ghar Programme,” aims to finance up to 500,000 homes across the country. Loans of up to Rs10 million will be provided, repayable over 20 years, primarily targeting low-income individuals for house construction on plots up to 10 marla.

Officials say the initiative is designed to boost economic activity in the construction sector and generate employment opportunities nationwide. Despite its economic objectives, experts warn that unless the scheme is restructured in line with interest-free or Shariah-compliant models, it may face serious constitutional and legal challenges as the 2028 deadline approaches.