Bangladesh

The lack of available and accessible housing finance has been identified by the Government of Bangladesh (GOB) as one of the important hurdles in improving the housing conditions for middle and lower income households. In that connection, the Ministry of Local Government and Rural Development, and Cooperatives, requested UNCHS to provide policy advice on the housing finance sector, with a particular focus on policies to increase access to housing finance by middle and lower income households.

UNDP agreed to provide funding for the study. The housing finance consultancy is to a) provide a brief overview of existing housing finance systems in Bangladesh, including those available to the urban and rural low-income households, and, b) to make suggestions for the improvement of housing finance mechanisms for lower-middle and lower income groups suitable to the conditions in Bangladesh.

The consultancy took place from November 11 through 23, 1998 in Bangladesh. UNCHS has been involved in the shelter and urban sector of Bangladesh since 1979. It conducted an Urban and Shelter Sector Review in 1993, and has recently formulated an Urban Poverty Alleviation Project which is awaiting final approval by the GOB. In addition, UNCHS has completed a Shelter Rehabilitation Assessment Study after the recent floods. A housing finance component that would increase access to housing credit for lower income groups, would complement projects by the GOB and International Agencies that already include micro-credit, infrastructure and services provision.

The Housing Fund: The Government has started a housing loan scheme, called the Housing Fund. The main purpose of the programme is to improve the quality of life of the poor people by providing loans to construct safe and durable houses. The Housing Fund programme was introduced in 1997-98 all over the country. Till now, the Government has allocated Taka 980 million for the Housing Fund. The Housing Fund is a small programme. The project provides (i) housing loans to low-income households to construct houses through partnership agreements with NGOs; and (ii) micro-credit to the loanees through implementing agencies/NGOs for income-generating purpose. The target groups of the Housing Fund are the rural poor, the landless, small and marginal
farmers, people who are rendered homeless because of calamities.

Bangladesh House Building Finance Corporation (BHBFC) a specialised public sector financial institution set up in 1973 under President's Order No. 7 of 1973, which repealed the House Building Finance Corporation Act XVIII of 1952. Its sole objective is to provide credit facilities for construction, repair and remodeling of dwelling houses and apartments in cities, towns and other urban areas. The lending policy of BHBFC has undergone changes over the years to cater to the funding needs of various types of housing. For quite a long time, the corporation was engaged in giving loans such as general loans and multi-storied loans.

Currently, it provides 5 types of loans: (a) general loans for construction of single or multi-storied residential houses on land/plots owned by a single person or by a husband and wife jointly; (b) group loans for the construction of flats by a group of borrowers on a plot owned jointly; (c) apartment loans for purchasing under-construction apartments in dhaka and chittagong Metropolitan areas; (d) adjustment loans for completion of an under-construction house; and (e) loans for constructing semi-pucca houses in district and selected upazila headquarters. Side by side with expansion of areas of house building financing, the corporation has also increased its loan ceiling. The loan amount sanctioned now varies between Tk 0.27 million and Tk 2.5 million.