Bangladesh must make affordable housing more accessible to more of its people if it is to deliver on the promise of its development, experts said.
To achieve this, affordable, long-term home loans would need to become available to consumers, they added.
But a lack of financing has contributed to the lack of growth in the sector despite high demand, speakers said at a virtual roundtable on February 16, jointly organized by the World Bank Group’s International Finance Corporation (IFC) and local think-tank Policy Research Institute (PRI).
The roundtable, titled “Housing Finance – Part 2” was moderated by Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI).
The keynote speech identified the main challenge of the housing finance market as the high cost of mortgages causing a lack of affordability, which is fuelled by factors such as informal income, cumbersome property titling regimes, a lengthy foreclosure process, lack of long-term finance for mortgage lenders and the low capacity of financial institutions to expand in the housing fund area.
Simon C Walley, the lead financial sector specialist at the Finance Competitiveness and Innovation Global Practice, World Bank, presented the event's keynote speech. Salman F Rahman, adviser to the prime minister for private industry and investment, was the chief guest.
As the country moves towards achieving high-middle income status, affordable housing should be made a priority sector, several experts said, adding that more people are expected to migrate towards urban areas for various factors like better job opportunities and better standards of living.
Addressing the issues related to housing needs, Salman F Rahman said it would be necessary to reconsider what is meant by an urban area.
He said the government is working on urbanizing rural areas as well so that the population is not concentrated in the cities.
One of the panellists at the discussion, Kulasekhare Chakravarthy, general manager at the National Housing Bank, India, suggested best practices in his country such as setting up specialized housing finance institutions by the central bank can help channelize long-term funding requirements of all the financial institutions for housing.
He suggested that these financial institutions should have a separate set of guidelines that can be prescribed for them which can be promoted under a PPP model to bring in public sector confidence and private sector efficiency.
“The focus can be on special segments like women borrowers, informal income borrowers, and lower-income groups to bring more people to make housing more accessible,” he added.
Other panellists included Shaikh Shamsuddin Ahmed, commissioner, Bangladesh Securities and Exchange Commission, Naser Ezaz Bijoy, country CEO, Standard Chartered Bank Bangladesh, and Md Salim Uddin, chairman, Bangladesh House Building Finance Corporation.
According to the McKinsey Global Institute, to replace today’s global substandard housing and build additional units needed by 2025 would require an investment of $9 trillion to $11 trillion for construction; with land, the total cost could be $16 trillion.
Of this, $1 trillion to $3 trillion may have to come from public funding.
The rest would have to be raised in the markets by banks and other financial institutions.
Allen Forlemu, regional industry director, Financial Institutions Group, Asia and Pacific, at the International Finance Corporation said the high-powered engagement by experts and policymakers at the roundtable signalled Bangladesh’s commitment to meeting the challenge of raising long-term finance for the housing sector.
Nuzhat Anwar, IFC acting country manager and Thierno Habib Hann, lead, IFC Global Housing Finance and Capital Markets - Asia and Pacific, also spoke.