Housing loans surge despite slower private credit growth

Housing loans jumped 12.05 per cent in the fiscal year 2022-23, outpacing overall private sector credit growth which slowed to 10.57 per cent.

Realtors say the surge in housing loans is directly linked to the rising costs of construction materials. Echoing the sentiment, bankers too advocate for the turbulent domestic economy to stabilise for further housing credit growth.

By June 2023, outstanding housing loans reached over Tk 1.19 trillion, accounting for 8.0 per cent of private sector credit, according to Bangladesh Bank data.

Housing loans have seen consistent increases, with 8.86 per cent and 12.05 per cent growth in the past two fiscal years.

In FY23, private sector credit fell short of its 14.1 per cent target and the previous year's 13.66 per cent growth, for which the central bank credited lower imports and depreciation of local currency Taka against the US dollar.

Private commercial banks hold the largest share with Tk 674.1 billion in outstanding housing loans, followed by Tk 293.8 billion with state-owned banks, Tk 49 billion with other banks and Tk 101.9 billion with specialised housing finance companies.

Run by government investment and guaranteed debentures, the state-owned Bangladesh House Building Finance Corporation holds Tk 43.8 billion in outstanding loans.

The corporation disbursed Tk 5.9 billion and Tk 7.0 billion in FY22 and FY23 respectively, recovering slightly more than it disbursed each year.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said a mix of several factors constrained the expansion of housing loans.

He pointed at high land and flat registration costs, declining individual purchasing power, rising construction material prices and a challenging economic climate.

These, he argued, limit the housing loan sector's potential for even greater growth.

Kamal Mahmud, former vice-president of the Real Estate and Housing Association of Bangladesh (REHAB), said that the escalating cost of construction materials is the key factor contributing to the rise in housing loans.

According to him, the heightened expenses for construction materials have largely impacted the overall affordability of housing projects.

[email protected]