Siddique Islam

The central bank is going to increase its refinancing fund for low-interest bearing housing loan to Tk 7.0 billion from the existing Tk 5.0 billion aiming to meet the growing demand for the loan.

"We're now preparing a proposal for submission to our next meeting of the board of directors, scheduled to be held on October 28," a senior official of the Bangladesh Bank (BB) told the FE Saturday, adding it is expected that the BB's board would give approval to allocation of Tk 2.00 billion more under the scheme.

He also said demand for housing loan under the refinancing scheme is increasing gradually mainly due to the lower interest rate.

The central bank's latest move came after disbursement of over Tk 4.0 billion by commercial banks and non-banking financial institutions (NBFIs) from the Tk 5.0 billion fund.

On April 12 last, the central bank increased its refinancing fund for housing loans to Tk 5.0 billion from Tk 3.0 billion earlier with the expansion of the areas under the scheme in Dhaka city.

The BB had relaxed its rules and regulations including more areas close to Dhaka City Corporation like Uttar Khan and Dakkhin Khan under the scheme for providing loans.

The people, who are living in six city corporations and the municipal areas of Tongi, Savar, Gazipur and Narayanganj are eligible for such loan facilities.

Under the BB scheme, an applicant having a monthly income up to Tk 50,000 will be entitled to a loan of maximum Tk 2.0 million at 9.0 per cent interest.

Currently, the banks normally provide loans to the housing sector at interest rates ranging between 12.50 per cent and 13.00 per cent, according to the central bank statistics.

The repayment period of a loan under the refinancing scheme is 20 years with a maximum grace period of one year.

A total of 32 commercial banks and NBFIs have so far signed agreements with the central bank to disburse the housing loans among the people belonging to the middle class.

On July 18, 2007, the central bank formed the Tk 3.0 billion fund initially for disbursement over a period of three years.

Market operators, however, welcomed the BB's latest moves, saying that it would help meet the growing demand of people, particularly fixed and low-income groups to build or purchase flat.

"It will help the middle and low income group people to meet their growing demand for the loan," President of the Real Estate and Housing Association of Bangladesh (REHAB) Tanveerul Haque Probal told the FE

He also said the REHAB has already made recommendation to the authorities concerned for taking necessary measures to enhance the BB's refinancing fund to Tk 10 billion from the existing level.

"Mostly lower and middle income groups will be benefited following allocation of more funds by the central bank under the re-financing scheme," Managing Director of the Industrial and Infrastructure Development Finance Company Limited (IIDFC) Asaduzzaman Khan told the FE.

Mr. Khan also said the demand for such loan has increased gradually due mainly to lower interest rate. "The upward trend will continue in the near future," he added.