FE Report

The government has taken an initiative to boost the house building sector in the country by injecting Tk 3.0 billion additional funds as loan to the state-owned Bangladesh House Building Financial Corporation (BHBFC), said sources.

"The sector is expanding as many people especially those belonging to the middle income group are opting for house loans to have dwelling facility of their own," said a finance ministry official.

The BHBFC sought the funds from the budgetary allocation as it has been facing increasing demand from potential borrowers, he said.

"HBFC simplified the loan sanction and disbursement procedures and offered new products at lower interest rate, which attracted many borrowers since 2007," he explained.

The financial institution sanctioned Tk 587 million and disbursed Tk 652 million in 2003-04 financial year but in 2007-08 fiscal the amounts shot up to Tk 2,200 million and Tk 1,457 million respectively, according to financial data of the company.

In the last fiscal year the amount disbursed could be up to Tk 2,450 million, an HBFC report submitted to the finance ministry showed.

The government will provide the fund as loan because earnings from interests will increase government revenue, said another official.

"The government provided credit to the organisation earlier at a rate of 9 per cent and now if it charges at bank rate of 5 per cent, it will bring extra money for the government," he said.

BHBFC took Tk 50 million loan in 1976-77 and repaid with interest by 1991-92.

"Even if the amount is given as equity, the corporation will have to pay 2 per cent on perpetuity basis," the official said.

Bangladesh Bank in its opinion said the organisation needs the fund and the government should provide the fund from the budget, the official added.

The central bank, however, cautioned the government that if it borrows from the banking system to provide the fund, it will create liquidity shortage in the market and if the central bank provides the fund, it will put more pressure on the inflation, he said.