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Financing the future home

  //house-home.news-articles.net/content/2025/10/27/financing-the-future-home.html
  Published in House and Home on Monday, October 27th 2025 at 18:40 GMT by The Daily Star
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The Housing Gap and Its Implications

The article opens with a stark portrait of the housing deficit: over 4.5 million new households have been added in the last decade, yet the supply of affordable, decent homes lags far behind. In cities such as Dhaka, the supply of rental housing is only about a third of the demand, pushing rents to record highs and fueling informal settlements. This shortage is not only a social challenge but also an economic one; the World Bank estimates that housing inadequacies cost Bangladesh 0.8% of its GDP in lost productivity each year.

The author cites a recent survey by the Bangladesh Institute of Development Studies (BIDS) that found that 35% of low‑income families spend more than 40% of their income on housing costs. The result is a vicious cycle of poverty, limited human capital, and restricted domestic consumption. The article frames the need for financing the future home as a cornerstone of broader economic development.

Current Financing Landscape

The article surveys the existing mechanisms that finance housing in Bangladesh. The Bangladesh Housing Finance Corporation (BHFC), a state‑owned entity, remains the primary source of long‑term home loans, offering 30‑year mortgages with interest rates that are marginally lower than commercial banks. However, the BHFC’s portfolio is concentrated in Dhaka and other metropolitan areas, leaving rural regions underserved.

Commercial banks, on the other hand, provide shorter‑term loans but often with higher rates and stringent collateral requirements. The article notes that the Bank for Financial Inclusion (BFI), a joint venture between the Bangladesh Bank and several local banks, has attempted to expand credit to low‑income borrowers, but still struggles to scale due to limited risk appetite.

One of the article’s key insights is the importance of land financing. In Bangladesh, a large portion of land is owned by the state and the army, and the process of acquiring land for development is cumbersome. This bottleneck is reflected in the article’s discussion of the “Land Ownership Reform Act of 2022,” which aims to streamline land registration and reduce transaction costs. Yet, the piece argues, reforms alone cannot unlock the financing potential of land without complementary credit and risk‑sharing mechanisms.

Public‑Private Partnerships (PPPs) as a Catalyst

The author presents PPPs as a viable route to expand housing finance. The article quotes an interview with Mr. Md. Rafiq, director of the Housing and Development Financing Company (HDFC), a new public‑private institution tasked with bridging the financing gap. HDFC is described as a “special purpose vehicle” that can issue bonds on the local market, attract foreign institutional investors, and provide risk‑mitigating guarantees for private developers.

The piece details HDFC’s first bond issue of 10 billion BDT in 2024, which raised 8% of the capital and was oversubscribed by local insurance companies and state‑run banks. By leveraging bond proceeds, HDFC can offer concessional loans to developers who incorporate affordable housing units into their projects. The article highlights that, under the HDFC model, developers are required to allocate 30% of their units as affordable housing, thereby internalizing the social component of development.

The author also cites the “Dhaka Metropolitan Housing Project,” a PPP that has successfully delivered over 50,000 low‑cost units in the last five years. According to the article, the project’s success hinges on a mix of cost‑effective construction methods, such as pre‑cast panels, and a financing structure that includes a 5% down‑payment by the government and a 90% credit line from HDFC.

Micro‑Financing and Community‑Based Initiatives

Beyond large‑scale PPPs, the article pays attention to micro‑financing and community‑based initiatives. It discusses the “Bangladesh Housing Development Fund” (BHDF), a scheme that offers micro‑loans to low‑income families to help them construct or renovate homes. BHDF’s interest rates are capped at 8% per annum, and the scheme includes a “home improvement grant” that covers up to 30% of construction costs for the poorest households.

The author points out that while micro‑loans have proven effective in urban slums, the scheme’s reach remains limited due to a lack of proper credit scoring systems. To remedy this, the article suggests the adoption of “digital credit scoring” tools that can assess borrowers’ repayment capacity using mobile money transaction data. The piece highlights a pilot project in Chittagong where a fintech startup partnered with the Bangladesh Bank to evaluate 12,000 households for micro‑loan eligibility, resulting in a 70% approval rate.

Institutional Support and Regulatory Reforms

The article stresses that institutional support is essential for scaling housing finance. The Bangladesh Bank’s recent “Home Loan Policy Framework” is presented as a key policy shift. Under this framework, banks are allowed to provide longer‑term home loans of up to 15 years with a maximum loan‑to‑value ratio of 70%. In addition, the policy offers a “first‑time buyer incentive” that reduces the effective interest rate by 1.5% for borrowers purchasing their first home.

The article also notes the introduction of a “National Housing Fund” (NHF) managed by the Ministry of Housing and Public Works. NHF is designed to collect small contributions from taxpayers and corporate entities and invest them in large‑scale housing projects. According to the article, NHF’s capital base reached 20 billion BDT in 2023, and the fund has already backed 120 housing units in rural Bangladesh.

Lessons from International Experiences

To provide a comparative perspective, the author draws lessons from international examples. A link within the article leads to a World Bank report on “Financing Affordable Housing in Developing Countries.” The report highlights that countries such as Brazil and South Korea have successfully used a mix of land‑ownership reforms, PPPs, and micro‑finance to create a robust housing market. The Daily Star piece underscores that Bangladesh could adopt a “hybrid model” that blends local financing mechanisms with foreign investment, especially in the context of large infrastructure projects tied to the “Growth Grid” vision of economic development.

Conclusion: A Multifaceted Approach for the Future

In its closing, the article reiterates that financing the future home in Bangladesh requires a multi‑layered approach. Public‑private partnerships, micro‑finance, institutional reforms, and regulatory changes must be aligned to create a sustainable ecosystem. The author calls on policymakers to adopt a “holistic housing financing strategy” that simultaneously addresses affordability, quality, and sustainability.

By framing housing finance as both a social imperative and an economic engine, the Daily Star article presents a compelling case for comprehensive reforms. Its detailed analysis of current mechanisms, future opportunities, and international best practices offers a roadmap that could help Bangladesh close its housing gap and support the broader ambition of inclusive growth and urban resilience.