Banks sweeten home-loan deals

Banks have slashed their interest rates on home loans thanks to the overall fall in the cost of funds and a slump in real estate sales.

The lending rates for home buyers remain much lower compared to loans going to other sectors as banks are sitting on a huge amount of idle money and lending for real estate is secured.

“The demand for housing loan has gone up as people's income has increased. It's a good loan as it is backed up by collateral,” said Golam Hafiz Ahmed, chief executive of NCC Bank.

As a result, many banks are interested in expanding their exposure to the housing sector, he said. He however said most of the loans are given out in urban areas as the return is satisfactory. 

On average, the interest rates for home loans range between 10 percent and 14 percent in state-run commercial banks, according to the central bank's July figures.

The rates that the private commercial banks are offering are 9 percent to 15 percent. However, two banks were found charging 13 to 17 percent interest rates.

Foreign banks charge the lowest rates -- of 8.75 percent to 13 percent.

The markets determine the interest rates, said Anwarul Islam, a spokesperson for Bangladesh Bank.

Banks can finance up to 70 percent of a property value, with the maximum financing ceiling being Tk 1.2 crore, in line with the BB guideline, he said. The borrowers will have to bear 30 percent of the project cost.

Of the total outstanding loans of Tk 579,857 crore last year, 2.64 percent was in residential housing in urban areas, 3.05 percent for commercial housing and 0.17 percent for home loans in rural areas, according to the central bank.

Standard Chartered Bangladesh said real estate experienced a rebound in sales in 2016. This has been possible after a reasonable reduction in property prices coupled with lower financing rates. 

The Asia-focused bank said it has been offering the lowest single digit interest rates for home loans since February this year to support the growth of the housing sector. Customers can now book a new home loan at an interest rate as low as 9.5 percent and also transfer their existing mortgage loan from other institutions at 8.99 percent.

Standard Chartered offers home loans for the purchase of new apartments and also for renovation, extension and decoration of existing apartments. The British bank is offering exclusive benefits for customers purchasing apartments from the Rajuk Uttara apartment project.

Customers can borrow home loans at a rate of 8.5 percent and also at a discounted processing fee of 1 percent after receiving Rajuk allotment letters for their apartments for the same project.