ISLAMABAD – Government-backed Apna Ghar housing scheme offers an easy way to get your own residence, but rising interest rates in the second decade could nearly double the total repayment cost.
Apna Ghar Scheme is being viewed as opportunity for those looking to get their houses through long-term financing. However, a closer look at the repayment structure suggests that a house worth Rs1 crore today could cost borrowers nearly Rs2 crore over the next 20 years, depending on how interest rates evolve.
Borrowers get a 20-year loan, with an interest rate of 5% for the first 10 years. For the remaining decade, the rate is linked to the prevailing KIBOR, plus an additional 2% or 3%, depending on the bank.
First 10 Years equals nearly Rs8Million
Consider a property valued at Rs1 crore (10million). Based on the estimates, the borrower’s monthly installment during the first decade would be approximately Rs66,000. Over 10 years, total payments would reach around Rs79 Lac, including interest.
Despite making these payments for a decade, the borrower would still owe the bank approximately Rs62 Lac. This remaining balance becomes crucial when the financing enters its second phase, where repayments could rise significantly if market interest rates increase.
The Second Decade
In second phase, the interest rate would depend on KIBOR and the bank’s applicable margin. For example, consider a scenario in which the prevailing rate is 10%, with an additional 3% margin, bringing the effective interest rate to 13%. If the rate rises further to 14%, the borrower could face a higher monthly installment.
A 14% interest rate would push the monthly payment to approximately Rs96,000. Over the next 10 years, total payments could reach around Rs1.1 crore.
When this amount is added to around Rs79 lakh paid during the first decade, the total repayment comes to roughly Rs1.9 crore. A house worth Rs1 crore today could require nearly Rs2 crore in loan repayments over 20 years under this scenario.
The financial picture, however, is not limited to the cost of borrowing. If the property’s value increases in line with inflation, a house worth Rs1 crore today could theoretically be valued between Rs6-7 crore after 2 decades.
That projection could make the scheme attractive to people seeking long-term homeownership, particularly if their primary objective is to secure a place to live while building property wealth over time.
However, this future valuation is estimate, not a actual return. Actual property prices depend on location, demand, economic conditions, taxes, maintenance costs and other market factors. Inflation-linked appreciation is not assured.
The scheme presents opportunity for families who want to own a home but cannot afford to purchase one outright. The initial 5% financing rate offers a degree of predictability during the first decade, while the second phase introduces uncertainty through its link to market rates.
Those looking to apply should therefore assess not only the initial installment but also whether they can afford significantly higher payments in the future. They should also account for any required down payment, bank fees, insurance or takaful, taxes and other charges, which may increase the overall cost of homeownership.
DISCLAIMER: The figures above are estimates, not a verified official repayment schedule. Actual installments and total costs will depend on the scheme’s applicable terms, the financed amount, repayment method and the interest-rate reset mechanism.
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