The classified loan in the real estate sector increased rapidly due to sluggish investment amid political unrest ahead of the upcoming general election in the country.
The total classified loan known as non-performing loan rose almost double to 7% from 4% during October 2012 to June 2013, according to the Bangladesh Bank data.
“The investment remained sluggish in the real estate sector in the election year,” said Real Estate and Housing Association of Bangladesh (REHAB) President Nasrul Hamid Bipu.
Despite having gas and electricity supplies, flats not being sold as buyers reluctant to buy plot or flat fearing political uncertainty, he said. As a result, he said, the real estate developers failed to pay back the bank loans. “The situation will become normal after the election.”
The total classified loan amount stood at Tk22bn or 7% of the total outstanding loans of Tk310bn in April-June quarter, 2013 from that of Tk19bn or 6% of total outstanding loan of Tk322bn in January-March quarter.
The classified loan was Tk13bn or 4% of total outstanding loan of Tk284bn in October-December quarter 2012.
Banking sources said non performing loan increased in this sector during the last one year due to a “drastic fall in the number of sales of both flats and plots.”
Around 20,000 to 22,000 ready flats worth between Tk140bn and Tk160bn remained unsold and the construction works of more 8,000 flats remained suspended, Rehab sources said.
The average sales of both flats and land plots have dropped by 60% in 2012 compared to the level of the previous year.
The main reason is non-availability of utilities. The other reason is that the banks became shy to provide any fresh project loans or loans to individual buyers during the political turmoil, said a Rehab leader.
Loan inflow in the real estate sector increased to Tk600bn or 35% in April-June period this year as compared to same period of the last year, according to the Bangladesh Bank data.
“The classified loan was increasing mainly due to rescheduling the loan,’’ said a senior executive of Bangladesh Bank.
Bank loans worth over Tk100bn in the real estate sector have been rescheduled in last one year by the banks, because of irregular repayments of loan installments by the clients, according to the central bank data.
The business is going sluggish, yet some businessmen preferred to continue with the business, contributing to the increase in loans, said Pubali Bank Managing Director Helal Ahmed Chowdhury.