FACILITATION of housing initiatives on a sustained basis merits a priority attention of the authorities concerned. The operational role of the state-owned House Building Finance Corporation (HBFC) has been on the decline. A report published recently in this paper highlighted the difficulties of the HBFC in making fresh funds available to the intending borrowers, mostly belonging to lower and middle income groups particularly in the urban areas. Such difficulties have arisen because of the non-availability of fresh funds for the HBFC to support its lending operations. In the past, this state-owned body funded its new loan operations by issuance of low interest debentures bought by the nationalised commercial banks (NCBs) and the Bangladesh Bank. But this funding mode has been unavailable in recent years, leading to a situation under which the HBFC has been constrained to rely on recoveries of past loans for new lending after defraying its operating and debt servicing costs. The loan recovery position of the HBFC has not been all that satisfactory, despite some recent improvements in the situation. Consequently, its new lending has been small, being Taka 0.7 million and Taka 0.4 million in fiscal 2003-04 and fiscal 2004-05 out of recoveries of Taka 3.0 million and Taka 3.4 million respectively.
Restructuring of the HBFC has long been overdue in the overriding interest of meeting more of the needs of lower and middle income urban households for housing finance. But things have not improved much with the HBFC. This has constrained new lending activities in the housing sector. Here, the expanding activities of the private sector banks and the NCBs, with the supports of their growing deposit resources, have been a welcome development. The housing loan portfolios of such financial institutions have, thus, expanded in response to the growing demand for housing finance. According to the recently-published Annual Report (2004-05) of the Bangladesh Bank, the NCBs and private sector banks attained dominant market position in housing financing with their outstanding housing loans, as of end June, 2005, amounting to Taka 50.3 billion compared to Taka 28.2 billion of the HBFC. In addition, two newer private sector specialised housing finance providers, with their outstanding housing loans aggregating at Taka 6.2 billion as of end June, 2005, have been slowly gaining ground, funding their operations with long term deposits including some contractual deposit schemes. But housing finance, on the whole, has been far too inadequate to meet the needs. Total country-wide housing loans stood at only 7.9 per cent of aggregate credits to the private sector in fiscal 2004-05.
The case for effective policy-supports to ensure proper housing facilities to the country's teeming millions can hardly be overstressed. The need for proper housing facilities is monumental, particularly in the case of the poor, and in the setting of urbanisation. Reliable estimates put the country's demand for housing at around half a million a year until the year, 2020. For urban areas in particular, this demand translates into a huge figure. Considering the fact that even modest levels of housing provision imply substantial investment, the projected growth in urban demand for formal housing in the country will be well-nigh impossible to meet, with existing housing finance arrangements. This makes it imperative to take strong and effective measures at the earliest to revamp the housing finance arrangements in tune with the needs.