Country Situation paper BANGLADESH Presented by: NHB-APUHF conference on Growth with Stability in the Affordable Housing Markets Delhi, India 29, January-01.

Country Situation paperCountry Situation paper

BANGLADESHBANGLADESHPresented by: Presented by:

NHB-APUHF conference onNHB-APUHF conference on

‘‘Growth with Stability in the Affordable Housing Growth with Stability in the Affordable Housing Markets’Markets’

Delhi, IndiaDelhi, India29, January-01 February, 201229, January-01 February, 2012

Chowdhury Mohidul HaqueChowdhury Mohidul HaqueExecutive DirectorExecutive DirectorBangladesh BankBangladesh Bank

Bangladesh & Asia Pacific Region

Basic information on Bangladesh

• Location: South Asia (member of the SAARC)• Area: 144000 Square Km• Population: 162.22 million(2009 estimate)• Population Density: 1127/square Km• Urban population as % of total population: 27.6• Urban population growth rate: 3%• GDP [current price and million USD]: 89159• GDP growth rate: 6.3% [2010]• GDP per capita [current price in USD]: 692 (2009)• Housing demand: 5 million , 0.5 million in urban and

3.5 million in rural being added annually• Main exports: Garments, fish, jute goods, leather

products• Main Crops: Rice, Jute, Wheat, Vegetable, Maize and

potato

Houses in Bangladesh

Slums, streets & planned residential area

Background

• Housing refers to the arrangement or provision of places to live. The sum total of policy framework, institutional infrastructure and regulatory environment provides the frame work of a country.

• Housing Finance is the institutional arrangement (public and private) for financing housing.

• Affordable housing is broadly defined as housing that is adequate in quality and location and does not cost in such a way that it restricts meeting other basic living cost.

• Bangladesh is a developing country in this region and has planned to become middle income country by 2015.

• The urban population constitute almost 28% of the total population and is increasing by 3.5% annually. Dhaka’s population growth rate is the highest among the major cities in the world.

Background

• Rapid and sustained urbanization and population growth in the country are fuelling the demand for well- located, adequate and affordable housing.

• Bangladesh is home to over 160 million people of whom around 31.5% is poor, who require more personalized housing solutions as existing market terms are not always affordable to them.

• Challenge of affordability is not new to Bangladesh but the need for instituting a supportive institutional framework and increase the supply of affordable land and housing is still a daunting task.

• Housing and housing finance services have the huge potential to be expanded to middle- and even lower- income families both in the urban and rural areas.

Demand for Housing

• Enhanced private sector role in the housing market would free government resources for other priority social and economic needs.

• Bangladesh’s housing market is characterized by a surplus of

upper-income group housing stock and shortage of affordable housing for the great majority of middle and lower-income population groups

• Estimates suggest a shortage of about 5 million houses in Bangladesh, with as many as 500,000 houses added annually in urban areas and 3.5 million added in rural regions

• There is great demand for houses of moderately priced;

• Comprehensive market-based demand studies are not available, and there is a need for further research on the housing demand of lower- and medium-income groups.

Housing and Housing Finance in Bangladesh- Policy Framework

• Housing is treated as a basic right in our constitution

• Government provides housing facility to all groups of people

• National Housing policy has been drafted recently and is now open for public comments

• Draft housing policy has the objectives of – Sustainable and affordable housing for all – Incorporation of public, private, cooperative,

NGOs and community organizations in housing initiatives

– Special emphasis to disadvantaged and poor members of the society in housing

– Special emphasis to housing for women at work

Housing and Housing Finance- Institutional Infrastructure

• Bangladesh has excellent institutional infrastructure for housing and housing Finance– Public sector institutions• Ministry of housing and works

– National Housing Authority (NHA)– City development Authority (RAJUK, CDA, KDA etc.)

• Bangladesh House Building Finance Corporation (BHBFC)• National Housing and Building Research institute• Directorate of architecture• Ashrayan Project• Grihayan Tahbil (Housing Fund)

Cont.

• Private Sector Organization– Developers• Land developers• Builders

–MFIs• Centre for urban Studies(CUS)

Housing and Housing Finance-Regulatory Environment

• General regulatory environment regarding housing– legal and regulatory framework concerning

the housing and real estate development includes laws such as • Building Construction Act (1952), • Town Improvement Act (1953), • Dhaka Master Plan (1959) and • Building Construction Rules (1984).

– National Building code (1993) regulates construction specification

Cont.

• Regulatory Environment in the housing finance– Prudential regulations for housing

finances by banks and NBFIs• These regulations allows and promotes

lending to housing (not for land purchase).• Housing finances are done by state owned,

private commercial banks and as well as specialized housing finances company both in the public sector(BHBFC) and private sector (DBH)

Initiatives for affordable housing by Government

• A very large segment of urban house is provided by the private house development companies.

• Government initiated housing supply basically cater for the government officials, middle income and lower middle income group in Dhaka as well as other major city of the country (RAJUK, National Housing Authority).

• For low income rural housing need government has taken many initiatives like Ashrayan Project, Ekti Bari Ekti Khamar (one house one farm) and Gore Fhera Kormosuchi (Back to home program)

• Grihayan Tahbil also work for low income affordable housing by providing long term low interest bearing finances

– Apart from government efforts some NGOs and MFIs fund self-construction for lower-income groups—but on a far smaller scale, relative to the existing need.

Housing Finance market -Bangladesh scenario

• The housing finance market is characterized by– High interest rate – Limited term lending– Insufficient fund from the public financial and specialized

financial institutions– Lack of transparency

• The legal, regulatory, and taxation frameworks are not sufficiently enabling for the development of primary and secondary housing finance markets.

• Bangladesh’s ratio of housing finance to GDP is less than 5 percent.

• Mortgage finance from private banks and specialized lenders is available only to urban households with high incomes (more than Tk 40-50,000 a month).

• Plenty of multistoried buildings for residents in urban areas specially in big cities like Dhaka, Chittagong, Khulna, Cox’s Bazar.

Cont…

• Government-subsidized housing finance through the Bangladesh House Building Finance Corporation (BHBFC) targeting lower- and lower-middle income groups.

• Outreach of Grihayan Tahbil, Ashrayan, Ghore Phera, and Ekti Bari Ekti Khamar is very limited

• That leaves a large lower-income housing market completely unaddressed, despite currently high growth rates of housing finance.

• HindranceHindrance – Lack of balanced funding models, – Absence of diversified instruments, – Absence of separate prudential

regulations/guidelines for the sector, and – Lack of affordable mortgages based lending

• Positive aspects: Positive aspects: – Islamic finance could help to enhance

access to underserved market segments. – Public-private partnerships and creative

cooperative solutions are promising.

Increasing affordability

Way forward

• Bangladesh need reforms in the field of Housing Bangladesh need reforms in the field of Housing Finance to cope up with the growing demand. Reforms Finance to cope up with the growing demand. Reforms should should

– improve regulatory enforcement and property registration.– prudential norms customized to housing finance, – a more effective collateral regime, – improved availability of housing and mortgage information,

• Policy interventions needed in the following areaPolicy interventions needed in the following area

– Finalizing the National Housing Policy;– The revamping of the Bangladesh House Building Finance

Corporation(BHBFC)– Increasing supply of housing stock for homeless, lower and lower

middle income people of both rural and urban areas– the promotion of long-term financing via a refinancing facility and – A national savings-for-housing scheme, and– The encouragement of a secondary housing market.