Due to climate change, education and employment opportunities, the population is rising in urban areas. IFC believes that this number could reach 50% of the country's total population by 2030, which is currently at 39.4%.
Of this huge population, 37% will be in the middle-income segment. But this middle-income group does not have enough opportunity to own a home in urban areas.
How do we solve this housing crisis? To figure this out, member of the World Bank Group International Finance Corporation (IFC), with the support of the Policy Research Institute (PRI), has organized five roundtable discussions on affordable housing since October 2021 to deliberate on the key challenges and opportunities in the urban affordable housing sector in Bangladesh and subsequently identify the crucial interventions/initiatives where the World Bank Group (WBG) can jointly work with the relevant public and private stakeholders to put together the building blocks for the development of this sector.
The sixth and final housing roundtable of the series was held on July 27 titled: “Affordable Housing Sector – Bangladesh, Roadmap Development”
Subsequently, IFC suggested forming a working committee with members from different stakeholder departments/organizations from the government and private sector, so that the next steps as per the roadmap concurred during the sixth roundtable can be followed up for actionable projects leading to investments.
As part of this support to the sector, IFC has also subscribed to Bangladesh’s first-ever privately placed housing bond by Brac Bank Limited, investing up to $50 million equivalent in Bangladeshi Taka (BDT) to help Brac Bank expand its affordable housing program.
The IFC-Brac Bank partnership in this program will enable thousands of low and middle-income urban families in the country to avail affordable housing loans. This represents a great milestone to develop the affordable housing market and to also improve the long-term bond market in the country.
Global Housing Finance and Capital Markets-Asia Pacific Lead Thierno Habib Hann and Ayesha Baig, senior operations officer, Financial Institutions Group (Upstream) International Finance Corporation presented the keynote jointly.
They shared the affordable housing sector development roadmap, based on the main takeaways from the earlier roundtables, which recommends concrete next steps to support the development of an efficient housing market in the country.
In the presentation, they said: “50% of the Bangladesh population is estimated to live in urban areas by 2030, which now comprises almost 39.4% of the total population in urban areas. The middle-income population is expected to be 37% of the total urban population in the next five years.”
“Currently, there are around 3.5 million Type A households that require a 600 sq. ft. housing unit. The minimum cost of each housing unit is calculated to be Tk20.4 lakh ($24,480). At Loan-to-Value ratio (LTV) of 70%, financing worth Tk14 lakh ($16,800) is required per housing unit,” it also said.
Planning Minister MA Mannan said: “Ensuring housing for every citizen of Bangladesh is also a right outlined in the constitution. It is one of our basic needs. For this, our government is working very hard to provide shelter to everyone. One such project is the Shelter project.
“The kind of projects we are undertaking to ensure housing is insignificant compared to its rising demand. So we need to work together,” he added.
To clarify affordable housing Dandan Chen, operations manager, World Bank said: “Many here are wondering what we really mean by saying affordable houses. Let me be clear, we are not talking about affordable or comfortable accommodation here, we are talking about ownership. Where a person can afford to own a habitable house within his income.”
Ahsan H Mansur, executive director at Policy Research Institute (PRI) said: “Most of the land in urban areas is for the rich people. There is no land for the poor. Even for middle-income people, it is almost impossible to secure affordable housing in urban areas.”
“Therefore, my request would be to allocate 60-70% of the private land still available to the government in urban areas,” he said.
Selim RF Hussain, managing director and CEO of Brac Bank Limited focused on the bank financing of affordable housing. He said: “The kind of financing that is being done here from the banking sector is totally inadequate. Also, the interest rate on that loan here is very low. In most cases, this spread is calculated to be not more than 0.8%. So overall, I think, for the improvement of the housing sector, Bangladesh Bank and other sectors need more policy support.”
