Dormitory funding becomes popular among NBFIs

Dormitory financing has become an attractive product for non-bank financial institutions (NBFIs) in recent times as the demand for accommodation keeps increasing rapidly in labour-intensive areas around Dhaka, sector insiders said.

As a result, financial institutions (FIs) are now enhancing their investments in these areas to grab a good share of such opportunity.

Another reason that encourages the NBFIs to put their money in small-sized housing is the security of their investment. Market players say the possibility of their investment in such ventures becoming classified is far less than that in other areas.

The FIs also opened their outlets in these areas in recent months to accelerate the activities through ensuring regular monitoring of their clients.

Managing Director (MD) and Chief Executive Officer (CEO) of Meridian Finance & Investment Limited (MFIL) Irteza A. Khan said dormitory financing has emerged as a highly potential product for them.

Considering its potential, the NBFI already opened its touch point in Gazipur to cover industrial areas of Gazipur, Ashulia, Savar and Narayanganj.

"Response and payment performance in dormitory financing have been very satisfactory."

Mr Khan said they have been providing loan to the landowners in these areas to build dormitories for apparel workers. "It doesn't require large investment. We're financing in between Tk 3.0 million and Tk 20 million," he said.

Managing director of National Housing Finance and Investments Ltd Md Khalilur Rahman said almost all the NBFIs have stepped up their activities in industrial areas like Gazipur, Savar and Ashulia in recent times.

Like them, his institution last month opened an outlet in Gazipur as there is large potential in financing the construction of dormitories for low-income groups, said Mr Rahman, also president of Bangladesh Leasing and Finance Companies Association (BLFCA).

"It's a secured financing and the possibility of funds becoming classified is quite low," he said, adding that landowners do not have to wait even a single day to get tenants once the project is completed because of growing demand for accommodation there.

National Housing Finance and Investments Ltd has invested around Tk 2.0 billion in such kinds of housing projects. Under such projects, the NBFIs finance building of dormitories having several rooms and a common toilet to accommodate a number of families.

Seeing success in the area of dormitory financing, some NBFIs are now offering loans to people for constructing small-sized apartments for limited income groups around the capital.

CEO and MD of IDLC Arif Khan said they would launch affordable housing project from this year for the people having minimum monthly salary of Tk 50,000.

Under the initiative, small apartments sizing around 800 square feet that would have two rooms will be built in areas adjacent to the capital.

"We're working with a global lender for this. I think it will help meet the demand of owning a flat for this community," he added.

A total of 35 NBFIs are operating in the country with total investment standing at Tk 850 billion (85,000 crore).

Over 60 per cent of the investment (Tk 480 billion) come from depositors while 45 per cent of the amount are invested in the industrial sector, followed by SMEs (small and medium enterprises), housing, construction and others.

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