BHBFC's home, other loans get costlier

Home loans from Bangladesh House Building Finance Corporation (BHBFC) now get costlier as the government approves a proposal raising interest rates for its various credit schemes, officials say.

Amid rise in the cost of fund and overhead costs, the corporation in December last sought finance ministry's nod to raise interest and got the approval from the ministry earlier this week, they add.

Earlier, the BHBFC board of directors had approved this interest-hike proposal.

The corporation presently charges 9.0-percent interest on all types of its loans for metropolitan areas in Dhaka and Chattogram and for flat loans across the country. With the latest government approval the corporation can charge 10-percent interest in this case.

With the ministry all-clear, the corporation will now charge 1.0-percent higher interest compared to the existing rate of 8.0 per cent for all other loans, excepting flat loan, across the country bar Dhaka and Chattogram metropolitan areas.

Furthermore, BHBFC will be able to raise interest rate to 8.0 per cent from the existing 7.0 per cent on farmers' housing loans in peri-urban, upazila sadar, and nearest growth-centre areas.

All these loans are being repaid under equal monthly-instalment system and these are Islamic Shariah-based loans, financed by the Islamic Development Bank under a second-phase investment.

Earlier, the corporation in a letter to the ministry had said presently the average housing-loan -interest rate of various financial institutions is 13.58 per cent, and in case of state-owned banks, the rate is between 12.90 per cent and 14 per cent.

It mentioned one of the main sources of funds for BHBFC is a project financed by the IDB. In the second-phase 'Rural and Peri-urban Housing Finance project', financed by the IDB, the corporation will have to pay the government between 5.75 per cent and 6.0 per cent compared to 3.0 per cent in the first phase.

"It has increased the cost of fund and overhead cost of BHBFC significantly," the BHBFC letter reads.

In July 2018, it lowered interest rate on flat-purchase loans to 9.0 per cent from 10 per cent for this segment. Later in September 2019, the rates were further lowered to 8.0 per cent for rural housing loans, Probasbanhdu loan, and house-renovation loans for areas other than Dhaka and Chattogram metropolitan areas.

At the same time, the interest rate on the farmers' housing loans in peri-urban, upazila sadar, and nearest growth centre areas was set at 7.0 per cent then.

syful-islam@outlook.com