HBFC to reduce loan interest rate by 2.5pc

State-owned House Building Finance Corporation (HBFC) has decided to lower interest rate of loans by 2.5 per cent to compete with other banks and financial institutions, officials said.
To augment its activities and get increased number of customers, the HBFC also decided to introduce five new loan products.
Besides, considering the high building construction cost, it has also decided to double the ceiling of housing loans, they added.
After getting endorsement from its board of directors, the corporation this week sought approval from the ministry of finance (MoF) in this regard.
A senior HBFC official told the FE Wednesday the rate of housing loan interest of most of public and private sector banks and financial institutions is much lower than that of the Corporation.
He said as a result, customers nowadays prefer to take loan from those institutions instead of HBFC. The number of customers is thus falling although the Corporation now has enough liquid money for lending.
Considering the present market rates of housing loans, the HBFC has decided to lower its rates, he said.
The official said the present rates of HBFC lending for house construction in Dhaka and Chittagong metropolitan areas and rest of the area are 12 per cent and 10 per cent respectively. The corporation's board has proposed the government to lower the rates to 9.50 per cent and 8.50 per cent respectively.  
The loan interest rate for buying apartment is presently 12 per cent which has been proposed to be lowered to 10 per cent, he said.
The HBFC presently provides seven types of loan for house construction and buying apartment.
Officials said, the Corporation has decided to introduce five more loan products, especially targeting rural areas. The new products will offer housing loans to non-resident Bangladeshis, farmers, special housing programme for rural people, house development programme, and house renovation programme.
The proposal sent to the MoF said construction cost of house and apartment has increased significantly in recent years due to increase in prices of construction materials. The upper limit of HBFC loan is Tk 5.0 million which is found inadequate considering the present high cost.
The HBFC proposed to raise the loan ceiling for Dhaka and Chittagong metropolitan area to Tk 10 million from existing Tk 5.0 million and also to double the limit for other areas.
Another senior HBFC official told the FE that the Corporation recently got funds from the government to expand its loan activities. Some more funds are scheduled to be available in the days to come. The Corporation has adequate money for expanding its activities further to the rural areas.
He said reduction of rates of interest of loans will help raise flow of loans across the country.
"On one hand, it has become essential to go for  vertical expansion in rural areas for saving arable lands while on the other, we want to provide rural people with housing facilities in line with the government's initiatives within 2021," he noted.
He also said the HBFC expects to set up new offices in 30 districts to attain the goal with financial support of Tk 8.0 billion from the Islamic Development Bank (IDB).
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