Experts for making housing a thrust sector to feed high demand

Bangladesh urgently needs to prioritise housing as a thrust sector with US$ 2.50 billion in annual investment to cope with fast-growing demand for affordable accommodation, as many still have no roof of their own over their head.

Experts at a virtual roundtable Monday made the clarion call along with suggestion for policy reform and launching fundraising tools for public subscription.

They said the government should give more attention on developing long-term funding options like housing bond, sukuks and pension funds along with availability of refinancing and credit-guarantee schemes to ensure formal credits for affordable housing.

Half of the country's population is expected to migrate to urban areas by 2030 for factors like more job opportunities in accordance with the growing growth trajectory and the climate-change events, they said, adding: "It will certainly enhance the necessity of affordable housing."

The suggestions and observations came at the online roundtable on 'Affordable Housing Finance'. The International Finance Corporation (IFC) of the World Bank Group and local think-tank Policy Research Institute (PRI) jointly organised the discussion.

Moderating the event, PRI executive director Dr Ahsan H. Mansur said proportional assets allocated for the housing sector by the financial institutions are very low at single digit.

"That's not right actually. Lack of policy support is certainly a major factor contributing to the poor state of housing finance here," he told the audience.

He points out that housing and real estate is the thrust sector in most of the countries, receiving a wide range of incentives, but it is not the same in case of Bangladesh.

"We need to change our mindset about the important area. We need to intervene in many areas like policy reforms, market enablers, primary and secondary markets," he says.

Managing director (MD) and CEO of Brac Bank Selim R.F. Hussain felt the necessity of nationwide consensus on the importance of the housing sector.

"So, it needs to be made a priority sector of the country. That is needed more than anything else. Once that is there, much of the coordination among the actual actors and regulators will come automatically," he says.

MD and CEO of Delta Brac Housing Finance Corporation Ltd Nasimul Baten said their average customer having monthly income between Tk 50,000 and Tk 100,000, taking an average loan of Tk 3.5 million.

Terming higher prices of property an obstacle for affordable housing here, he said the loan amount in many cases is requested higher than their affordability in terms of monthly income.

"We can extend more but we're not doing it because we cannot take too many risks," he added.

Speaking as chief guest, deputy governor of Bangladesh Bank Ahmed Jamal said the country must have strong housing sector to reach its goal of a developed country by 2041.

"There is huge potential. US$ 2.50 billion will annually be required. It is a big market. Long-term investment is needed. There should be a well-functioning secondary bond market," he said.

He thinks affordable housing will be a tough task just relying on banks and NBFIs. "Bond market is essential and the government is working on it. It might take some time," he says.

Manager of IFC's financial institution group Hemalata Mahalingam said the existing demand for affordable housing for middle-income class is 6.0 million units which is expected to increase to 10 million units by 2030.

"To meet the growing demand, home loan worth US$ 2.50 billion will be needed per year," she said, adding that most of the financial institutions offer housing loans but they target the upper-income class.

Additional secretary of the Ministry of Finance Mofiz Uddin Ahmed, BSEC executive director Mohammad Rezaul Karim, DMD of IDLC Syed Javed Noor and regional housing finance lead Asia and Pacific of the IFC Thierno Habib Hann, among others, spoke at the event.