Availability of housing finance in Bangladesh is increasing but only for the high-income groups, World Bank said, suggesting policy reforms for ensuring access of the lower-income people to housing finance.
Less than 10 per cent of the potential borrowers have access to housing finance, said World Bank in its report titled ‘Expanding Housing Finance to the Underserved in South Asia: Market Review and Forward Agenda’.
‘Housing finance in Bangladesh is limited to the top income groups,’ the World Bank said, adding that mortgage lenders have to rely on short-term funding and the legal, regulatory, and taxation frameworks did not allow primary and secondary housing finance markets to develop.
Bangladesh’s housing market is characterized by a surplus of upper-echelon housing stock, leaving an acute shortage of affordable housing for the great majority of middle and lower-income population groups.
But potential housing finance market is huge as World Bank found only 23 per cent of housing in Bangladesh’s urban areas and 2 per cent in rural areas were permanent housing. Such ratio is lowest, on average, in surveyed countries including India, Pakistan, Nepal, Sri Lanka and Afghanistan.
The World Bank estimated shortage of about 5 million houses in Bangladesh in 2009. In urban areas, the annual estimated demand amounts to 300,000–500,000 houses.
The multilateral lender estimated Bangladesh’s annual housing finance turnover at Tk 14,200 crore, about 6 per cent of total credit to the private sector and less than 3 per cent of the GDP.
‘Housing affordability [in Bangladesh ] is being eroded by poor land administration policies, which have resulted in very high land prices that make urban housing prohibitive for lower-income groups; and in infrastructure that is inadequate for expansion into pre-urban and rural areas,’ the report observed.
Citing the mode of operation, World Bank said, housing finance issues [in Bangladesh] are covered under the prudential regulations for consumer finance. ‘These generalized arrangements miss out on important rules suited exclusively to housing finance activities.’
The Bangladesh market has considerable potential to absorb Islamic financial opportunities and instruments, WB said. ‘This mode of finance can play an important role in the country because it often targets customers with lower-than-average incomes.’
Careful blending of government policies, smart subsidies, planning, public-private partnerships, and technical assistance for housing micro-lending are required to further develop the low-income housing and housing finance market in Bangladesh.
