Unlocking Potential: Optimizing Home Loan Benefits

The availability of a home loan offers a promising solution, providing prospective customers with the chance to translate their homeownership aspirations into tangible reality. Beyond simply addressing immediate financial constraints in acquiring apartments or homes, it emerges as a secure strategy for alleviating long-term financial burdens, particularly when contrasted with alternative sources. Both banks and non-bank financial institutions in Bangladesh have remained steadfast in offering various home loan products to their customers, thereby playing a pivotal role in fortifying the entire housing sector. Nonetheless, there is still much to be done to realize the full potential of home loans.

"Ensuring access to decent housing is essential for people to live fulfilling lives. Despite the higher security of home loans in terms of recovery rates compared to other types of loans, many banks have yet to fully embrace this mindset. More banks and other lending institutions must step forward by enhancing their offers of home loans. This action will not only enrich the financial sector but also foster the social development of Bangladesh," shares Md. Wahiduzzaman, President of REHAB.

He further emphasizes the significance of lenders offering home loans with longer timeframes, such as 30 years, which would reassure buyers of its viability as a wise investment. With the apartment serving as collateral, the risk of home loans turning into bad debts diminishes significantly. This option should be extended to segments of the middle class, particularly as flat prices have surged due to various factors in recent times.

Highlighting that people generally perceive home loans from banks as a safer option, Mehedi Hasan, Chief Design Coordinator of Credence Housing Ltd., suggests that banks should reassess their lending policies.Specifically, Hasan proposes increasing the loan amount percentage beyond the current two crore limit to address the current situation of soaring flat prices driven by rising raw material costs. He further highlights that given the secured nature of home loans, such adjustments would be prudent.

"According to the provision," explains Md. Rashed Akter, Head of Retail Distribution at Midland Bank, "If a property is valued at 2 crores, the bank will provide up to 70 percent financing. For properties valued at 3 crores, buyers will receive either 2 crores or 70 percent of the property value, whichever is lower. This financing extends to purchasing any apartment within the specified amount, excluding select upscale areas such as Gulshan or Dhanmondi."

He also pointed out that without a policy revision, this provision cannot be altered to provide prospective buyers with increased funding. Any adjustments to this policy would need to be initiated by the central bank.

Due to their specialization, companies dedicated to home loans scrutinize loan prospects more meticulously, enabling them to disburse more loans compared to banks. This enhanced financing capacity proves highly beneficial for buyers seeking to secure loans for their home purchases.

"We always prefer to disburse our loans through developers with established reputations for constructing buildings in compliance with rules and regulations, ensuring proper handover procedures to buyers. However, we refrain from engaging with those who lack sincerity in these matters, as it poses the risk of unintentional loan defaults for buyers. Consequently, buyers associated with reputable companies rarely encounter challenges securing home loans, as these loans offer safety and security," explains Mahbubur Rahman, Vice President of National Housing Finance and Head of Business Division.

He further underscores the importance of having a regulatory body that can take action against companies that fail to meet construction standards and deliver projects on schedule. With such oversight in place, banks and other financial organizations dedicated to home loans would be more inclined to finance additional projects.

Non-bank financial institutions are also making additional efforts to reach the lower-income group and extend their services beyond Dhaka.

"We have established an extensive network across major districts, strategically deploying mobile lending officers. Presently, our focus lies on empowering the lower-income demographic through collaborative efforts, such as group construction initiatives involving approximately 5 to 7 individuals per project, aimed at developing their residences outside of Dhaka. Notably, 20 out of our 27 branches are located beyond Dhaka, reflecting our commitment to reaching underserved communities. Our priority is to cater to individuals who require financial services but may face barriers accessing traditional banking channels," states Anayet Hossain, Senior Assistant Vice President and Head of Home Loans at LankaBangla Finance.

He has also highlighted the marginal default rate in home loans, which indicates the earnest commitment of borrowers to accessing sustainable housing solutions.Additionally, he has emphasized the importance of central bank support in providing long-term funding, which would greatly benefit those seeking viable housing solutions.