With the cost of funds and overhead costs going up substantially, the Bangladesh House Building Finance Corporation (BHBFC) wants to raise interest rates of its various loan programmes, officials said.
The corporation recently sought a finance ministry nod after its board of directors approved a proposal in this regard.
The state-owned housing finance corporation presently charges 9.0 per cent interest on its all types of loans for metropolitan areas in Dhaka and Chattogram and for flat loans across the country.
The corporation now wants to raise the interest rate by 1.0 per cent.
Also, the corporation wants to raise the interest rate by 1.0 per cent from existing 8.0 per cent for all other loans, except flat loans, across the country other than the Dhaka and Chattogram metropolitan areas.
Furthermore, the BHBFC wants to raise loan interest rate to 8.0 per cent from the existing 7.0 per cent for farmers' housing loans in peri-urban, upazila sadar, and nearest growth centre areas.
All these loans are repaid under an equal monthly installment system and there are Islamic Shariah-based loans, financed by the Islamic Development Bank under second phase investment.
The corporation wants to apply the new rates of interest on loans to be given from the very first day of next year.
The BHBFC in a letter to the ministry said that presently the average housing loan interest rate of various financial institutions is 13.58 per cent and in case of state-owned banks the rate is between 12.90 per cent and 14 per cent.
It said one of the main sources of funds of the BHBFC is a project financed by the IDB. In the second-phase of the 'Rural and Peri-urban Housing Finance project', financed by the IDB, the corporation will have to pay the government between 5.75 per cent and 6.0 per cent compared to 3.0 per cent in the first phase.
"It has increased the cost of funds and overhead cost of the BHBFC significantly," the letter mentioned.
Contacted, a senior BHBFC official told the FE that the board of directors of the corporation has decided to raise the interest rates taking into consideration the cost of funds.
"We will apply the new rate after getting approval from the government," he said.
In July 2018, the BHBFC lowered interest rate on flat purchase loans to 9.0 per cent from 10 per cent for this segment.
Later, in September 2019, the rates were further lowered to 8.0 per cent for rural housing loans, probashbondhu loan and house renovation loans for areas other than Dhaka and Chattogram metropolitan areas. At the same time, the interest on the farmers' housing loan in peri-urban, upazila sadar, and nearest growth centre areas was reduced to 7.0 per cent.
[email protected]
