Housing Finance in Bangladesh

[zayedprafi]

The lack of available and accessible housing finance has been identified by the Government of Bangladesh (GOB) as one of the important hurdles in improving the housing conditions for middle and lower income households. In that connection, the Ministry of Local Government and Rural Development, and Cooperatives, recently requested UNCHS(United Nations center for human settlement ) to provide policy advice on the housing finance sector, with a particular focus on policies to increase access to housing finance by middle and lower income households. UNDP(United Nations Development Programme) agreed to provide funding for the study. The housing finance consultancy is to a) provide a brief overview of existing housing finance systems in Bangladesh, including those available to the urban and rural low-income households, and, b) to make suggestions for the improvement of housing finance mechanisms for lower-middle and lower income groups suitable to the conditions in Bangladesh. The consultancy took place from November 11 through 23, 1998 in Bangladesh.
UNCHS has been involved in the shelter and urban sector of Bangladesh since 1979. It conducted an Urban and Shelter Sector Review in 1993, and has recently formulated an Urban Poverty Alleviation Project which is awaiting final approval by the GOB. In addition, UNCHS has completed a Shelter Rehabilitation Assessment Study after the recent floods. A housing finance component that would increase access to housing credit for lower income groups, would complement projects by the GOB and International Agencies that already include micro-credit, infrastructure and services provision.

[zayedprafi]

The need for improvements in the housing finance system has been expressed in several studies and by different government and international agencies. The Asian Development Bank prepared a comprehensive urban institutional improvement project in 1993, of which an analysis of the housing finance sector was a part. Detailed recommendations for action were made. However, the project was not approved and government did not take up the proposed actions. The World Bank is presently assisting Bangladesh in the formulation of an Urban Strategy. The draft report also identifies housing finance as one of the constraints in improving housing in urban areas, but it does not include an analysis of the sector. The present study builds on these efforts and attempts to formulate recommendations for improving access to housing credit for various groups of presently undeserved urban and rural households.