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Bangladesh Bank raises housing loan ceiling by 20pc

imagesBangladesh Bank yesterday increased the housing loan ceiling by 20 percent in a bid to boost apartment sales and help the ailing real estate sector.

Banks can now lend a maximum of Tk 1.20 crore to an apartment buyer, up from Tk 1 crore, the BB said in a notice.

The move comes just a week after Housing and Public Works Minister Mosharraf Hossain promised a rescue package for the struggling real estate sector.

“It is a must to bring dynamism back to the sector,” he said at the inauguration of the REHAB Winter Fair 2014 on December 24 last year.

Liakat Ali Bhuiyan, vice-president of the Real Estate and Housing Association of Bangladesh, praised the move, which, as per the BB circular, comes in response to the price hike of construction materials.

He, however, said the limit should have been increased a while ago, as property prices have been on the rise for the last couple of years.

Still, it is a good move and will obviously help the sector, Bhuiyan added.

The central bank has kept the debt-equity ratio for housing finance at the earlier rate of 70-30, despite requests from realtors to increase it to make it financially easier to purchase apartments.

At present, to purchase a flat, for instance, worth Tk 1 crore, the buyer can at most take out Tk 70 lakh in loans and pay the rest himself. But most banks do not offer the maximum amount of loans.

“Real estate is a secure place for investment. Banks can easily recover money in case of defaults by selling the property,” said Toufiq M Seraj, managing director of Sheltech, a pioneer in the sector.

Banks will not face any difficulty if BB offers more loans as they can sell the property for the loan amount and recover their money, he said.

The sector’s sales fell as much as 60 percent in 2013 and the situation is not any better now as a significant number of completed flats remain unsold despite the stable political environment.

REHAB surveyed 209 companies last month and found that they were sitting on 12,185 units of unsold flats worth Tk 8,811.19 crore.

Since the association has around 1,200 member companies, the actual number is far higher, officials said.

The companies surveyed sold 1,749 units of flats in 2014, in contrast to 1,965 units in 2013 and 2,370 units in 2012.

The slump can mainly be attributed to the buyers’ lack of access to low-cost home loans.

Apartment buyers now have to pay up to 18 percent rates for loans, which ward prospective buyers off. Subsequently, the housing minister, at the REHAB event, also called for a Tk 20,000 crore fund to disburse long-term loans with single digit interest rates to middle-income apartment buyers.

The real estate sector now contributes to around 7 percent to the country’s GDP, employing around one lakh skilled people and another 35 lakh in its linkage industries, according to industry people.

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Report: Suman Saha
Source: Daily Star

 

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