State-owned finance provider plans big with low-cost housing

Low-cost housing would be the next big thing for the real estate sector. Bangladesh House Building Finance Corporation (BHBFC) would give priority to home loan applicants who opt for low-cost technology.

One such technology makes use of hollow bricks of uniform shape and size instead of the conventional ones. The bricks require a very low amount of plaster, which helps cut construction costs to a great extent.

Debasish Chakrabarty, managing director of the state-owned housing finance provider, shared the concept and the organisation's future plans with The Daily Star recently.

It takes 21 to 28 days to complete a roof in the conventional method while only 5 days if the hollow bricks are used, he said.

“We are promoting the low-cost housing technology, which has the ability to save houses from fire, flood and earthquake.”

India uses the technology there. Kenya and Tanzania are also using the method that is called “Koto” in Malaysia, he said.

“We have also discussed the benefits of using the technology with the leaders of the Real Estate and Housing Association of Bangladesh. “In future, we want to form a subsidiary and develop the product on our own.”

The housing finance organisation was launched in 1952. The corporation has so far given loans for constructing 2 lakh housing units. The BHBFC made a profit of Tk 166 crore in the last fiscal year. “We paid 42.5 percent of the amount or Tk 86 crore as tax in advance to the government. It has never counted any loss since its inception”.

The organisation received Tk 110 crore as capital from the government by 1992 and afterwards it met its needs by selling government guaranteed debentures worth Tk 1,864 crore to different banks.

The current balance of debentures stands at Tk 365 crore.

In addition to this, the organisation received Tk 350 crore from the government as loan at a rate of 3 percent and hopes to get another Tk 150 crore by this year. BHBFC is the only state organisation that gets funds from the government as loans.

The BHBFC will get another loan of Tk 865 crore from the Islamic Development Bank. The amount will come on condition that it has to be distributed in areas outside of Dhaka, Chittagong and Sylhet metropolitan areas in the next two years, he said.

“The IDB loan will be a huge boost to the organisation. So I have taken several steps and re-arranged the loan products.”

The BHBFC has launched Nagar Bandhu, a loan product for the people living in Dhaka and Chittagong. Palli Maa is another product that will cover the rest of the country, he said.

The home-loan provider has 29 branches now and plans to open 71 more soon, he said.

The organisation had been enjoying monopoly in giving loans since its inception before the launch of Delta Brac Housing in 1996 and National Housing Corporation in 1999, he said.

“The market share we have is not satisfactory at all.” Specialised housing finance firms like BHBFC have 12 percent market share, according to Bangladesh Bank.

Private banks have 55 percent market share while state banks have 21 percent, foreign banks 4 percent and non-banks 8 percent.

In rural areas, private banks have a very low market share and BHBFC is the leader there.  “Almost 63 percent of our loans were distributed in rural areas in the last fiscal year. The amount will increase when we will start distributing IDB loans.”

“We have already lowered our rates. The interest rate for building construction is now 9.5 percent, for flats it is 10 percent and 8.5 percent for rural areas outside of the Dhaka metropolitan area.”

“Our ceiling was as low as Tk 50 lakh. We have increased the ceiling to Tk 1 crore for building construction and for flat to Tk 80 lakh. My competitors such as private banks have a ceiling of Tk 1.2 crore.” One loan product of BHBFC that has created a stir is for expatriates called Probash Bandhu.

“Bangladeshi expatriates with three years' work experience can now visit our website, fill up the form and apply online for the loan.”

“We have earlier allowed expatriates only of five countries. But due to its huge demand, we have withdrawn the bar. Now people from any country can apply for it.”

The Probash Bandhu has left a very good impact on the housing loan sector. Private banks have also started offering loans to expatriates. “We wanted to do something like that and wanted others to follow us.”

The nominated local representatives of the expatriates can contact the corporation and complete the procedure to receive the loan.

The expatriates will be given the opportunity to clear the loan in 25 years, the highest among all products of BHBFC, he said.

The organisation lags behind its competitors in the field of technology and automation. “The quality of service of BHBFC is still lower than that of private banks. We are working on it.”

“We are planning to launch an e-filing system. All information of the loan applications will be available in the e-filing system, which will definitely decrease corruption in BHBFC.”

People will be able to know the condition of their application and place their complaints online, he said.

“The implementation of the system needs huge investment as we will need to set up computers on each desk. But we do not have the right to purchase a computer by ourselves. We need to take permission of the ministry to do such purchases also.”

The corporation does not have any data centre. “We will soon float tender to establish a centralised data-based centre.”

“The organisation does not do its banking related work such as collections of loans by itself, whereas in India and Malaysia organisations like us do these things by themselves.”

“Our customers have to stand in long lines in state-owned banks and face harassment to clear their monthly payments of housing loans. To ease the pressure, we have already signed a deal with Standard Chartered Bank.”

“The monthly payments of the clients will be sent online to our accounts directly from the customers' accounts under the direct debit system. The whole system will not cost anything for the customers, banks and BHBFC.”

“We also cannot recruit directly. We have to apply for new manpower. We can only give requisitions. We have only 455 people whereas we should have 795.”

The organisation will organise a three-day housing and finance fair on October 19 at the Sonargaon hotel in Dhaka. Different private banks and real estate companies are scheduled to take part in the fair.

The BHBFC's outstanding loan is decreasing and it reached Tk 3,000 crore while the default loan rate now stands at 6 percent, he said.

“To increase the outstanding loan amount, we have to increase the loan disbursement target. We have achieved last year's loan sanction target of Tk 350 crore.”

“We have sanctioned Tk 353 crore last year. Whereas our loan disbursement target was Tk 272 crore and we disbursed Tk 278 crore.”

Now it targets to disburse Tk 400 crore in the next fiscal year and increase the amount to Tk 700 crore to lower the cost of funds, which now stands at around 8 percent, he said.

“We have upgraded the condition of the office of BHBFC, as we believe that the office environment determines the service quality.”

“The organisation wants to showcase the latest available technologies of the sector through the October housing fair and through its head office.” “We have urged the businesses to turn one of the floors of BHBFC into 3D floors so that visitors feel encouraged to use it in their houses.”

The corporation also reorganised its loan product for farmers. “There was no such loan for the farmers in Bangladesh. We are forming the structure of the loan. The low-cost housing will be used here.”

Anyone with farm land can also apply for the loan. People can also take loans to build guest houses in their village homes, he said.

“We share all these information on our Facebook page. People can place their queries there and we respond to them through the social media platform as soon as possible.”

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