BHBFC Sets Tk 8,000cr Housing Finance Push, Targets NPLs Below 3pc

The Bangladesh House Building Finance Corporation (BHBFC) is preparing for an aggressive expansion of housing finance, targeting total investment of up to Tk 8,000 crore over the next three to five years, while cutting its classified loan ratio to below 3 per cent.

Acting Managing Director Md. Noor Alam Sardar said, the state-owned housing financier would steadily raise annual loan disbursement from the current target of Tk 1,200 crore to Tk 2000 crore within the next five years.

“We are going to increase housing loan disbursement and investment over the next five years to address the housing crisis faced by middle and lowe-middle-income people,” he told the Daily Observer in an interview.

The corporation also plans to invest Tk 1,500 crore to Tk 2,000 crore annually over the next three to five years as part of its expansion strategy.

For nearly seven decades, BHBFC has been financing for housing to middle and lower-middle-income households at comparatively affordable rates and on easier terms. Its latest drive comes as soaring land and construction costs continue to put home ownership beyond the reach of a growing section of the population.

Noor Alam said BHBFC had already diversified its products to meet changing customer needs and currently offers 12 loan products covering individual house construction, flat purchase and flat registration.

Among the new products is ‘Swapno Neer’, designed specifically to provide relatively affordable housing finance to low and middle-income customers.

The corporation is also shifting greater attention to rural and peri-urban Bangladesh, where access to formal housing finance remains limited.

“To implement the government’s development plans and election manifesto, the ‘Rural and Peri-Urban Housing Finance Project’ has been undertaken,” Noor Alam said.

Once fully implemented, the project is expected to facilitate the construction of around 17,000 housing units and benefit nearly 70,000 people. The second phase is now under implementation, while discussions are continuing with the government and development partners for third phase.

Under the first phase, supported by the Islamic Development Bank (IsDB), BHBFC mobilised around Tk 928 crore in government loans. The corporation expects to mobilise around Tk 4,000 crore under the second phase.

For the proposed third phase, it is seeking around Tk 8,000 crore to expand housing finance at the grassroots level, he said.

BHBFC has also sought another Tk 1,000 crore government loan assistance for finance schemes including housing loans for government employees, the Swapno Neer product and farmers’ housing loans.

Noor Alam said a BHBFC feasibility study had found strong demand for housing construction loans.

“Rising land and construction material prices have made house construction increasingly difficult for middle and lower-middle-income people,” he said, adding that the corporation is taking measures to keep monthly repayments within customers’ reach.

BHBFC currently offers housing finance at one of the lowest rates available in the market, according to its acting managing director.

It has introduced the low-cost ‘Krishak Abashan Loan’ for farmers and extended the repayment period of Swapno Neer loans to reduce the monthly burden on borrowers.

There is, however, no immediate plan to cut lending or profit rates further, as financing costs remain dependent on market conditions, he said.

“However, considering the convenience of customers, work is underway to introduce new loan products,” Noor Alam said.

The corporation is also preparing to move into green and climate-resilient housing finance.

A ‘Green Residential Building Model’ has already been formulated to support environment friendly home construction. Under the IsDB-funded project, BHBFC plans to extend financing for green and climate-resilient housing.

It is also in discussions with France-based development partner AFD over another project and has held preliminary talks with another development partner.

BHBFC, however, has no immediate plan to directly finance housing projects with private developers or enter into public-private partnerships.

“Such a decision is a long-term policy matter,” Noor Alam said, stressing that the corporation’s primary responsibility remained financing affordable homes for marginalised and lower-income customers.

The expansion will require a stronger funding base. Government remains BHBFC’s principal source of funds through paid-up capital, government loans, deposits and debenture sales.

The government has recently increased BHBFC’s paid-up capital from Tk 100 crore to Tk 500 crore. So far, Tk 115 crore has been released, leaving Tk 385 crore still payable.

BHBFC is also seeking greater support from development partners to expand its lending capacity. At the same time, the corporation is moving to strengthen loan recovery and tighten controls over classified loans.

Noor Alam said BHBFC is determined to bring its classified loan ratio below 3 per cent within the next three to five years.

He attributed the corporation’s relatively low classified loan ratio to careful customer selection, effective monitoring, appropriate lending policies, adequate collateral and stronger governance.

“No loan has been written off since the corporation was established and no interest has ever been waived,” he said. “Even in the case of large defaulters, there is adequate collateral.”

To recover loans trapped in prolonged litigation, BHBFC is increasingly relying on direct communication with borrowers alongside legal proceedings. “In many cases, we are able to encourage customers to repay their loans through continuous communication,” Noor Alam said.

The corporation is also stepping up digitalisation to reduce delays and customer harassment, he said. A maximum of 30 days is generally set for processing a formal loan application, although many applications are approved within two to three weeks.

“At present, the entire process from receiving a loan application to approval by the managing director is being conducted online. Customers can now apply for loans from home and track application status, obtain loan statements and receive sanction letters online” he said.

The movement of files from branches to the head office has also been digitised, reducing the need for customers to make repeated visits to BHBFC offices. Automated notifications are sent at different stages, while officials can monitor the process in real time.

Noor Alam rejected allegations that political influence, lobbying, bribery or irregularities were being tolerated in loan approval and disbursement, saying BHBFC followed a zero-tolerance policy.

Borrowers must submit documents including proof of land ownership, approved building plans, permissions and personal information before loans can be processed.

“Verification of land ownership in Bangladesh is a complicated process. Customers have to collect documents from different government offices. When there is a delay in collecting these documents, customers often associate the resulting difficulties with BHBFC,” he said.

He added that every complaint is taken seriously and investigated through the Grievance Redress System, complaint boxes and other channels. A central disciplinary committee also monitors such complaints.

Looking ahead, Noor Alam said he would give priority to three areas: sharply increasing housing finance, reducing classified loans and ensuring stronger customer service, transparency and accountability.

“My main goal is to establish BHBFC as a trusted institution for the middle and lower-middle-income population in building affordable and environment-friendly dream homes,” he said.