The central bank yesterday increased the ceiling for home loans by 66.66 percent to help the expanding middle class buy properties and build houses amid the price hike of construction materials.
As a result, a single client will be able to avail a maximum of Tk 2 crore in home loans compared to Tk 1.20 crore previously, according a central bank notice sent out to all lenders.
The Bangladesh Bank, however, kept unchanged the debt-equity ratio at 70:30, meaning clients will be allowed to receive up to 70 percent of the total construction cost of homes from commercial banks.
As per the central bank notice, rising per capita income, the growing middle class, and the price increase of construction materials motivated the decision.
This came in response to a request of the Association of Bankers, Bangladesh (ABB), a forum of managing directors of commercial banks. On November 7, the platform, at a meeting with the BB, called for raising the credit ceiling for the housing sector.
BB Governor Fazle Kabir had assured the ABB of taking a positive decision to this end at the meeting.
The Real Estate & Housing Association of Bangladesh (REHAB) welcomed the BB move.
“This will not only help the real estate sector but also the 250 backward linkage industries,” said Liakat Ali Bhuiyan, first vice-president of the association.
The increase in the credit ceiling would give a fillip to the sector, which has been recovering from a slowdown, he said.
The housing market went on a downturn in 2012 for intermittent political instability, a bearish stock market and the government’s apathy towards providing gas connections to new buildings.
The property price corrections in the past few years have lured in many prospective home buyers and the market is invigorated again.
As of June 2018, total outstanding home loans from banks and financial institutions were Tk 81,520 crore, according to data from the BB.
In fiscal 2002-03, total outstanding loans were Tk 7,527 crore, indicating that financing to housing grew 11 times in 15 years.