Interest rates on govt housing loans set to rise

The Bangladesh House Building Finance Corporation (BHBFC), a government entity specialising in housing loans, is increasing interest rates across its loan portfolio. 

The government has approved a one per cent hike, with new rates expected to take effect next week following the issuance of updated guidelines. This change will add financial pressure on individuals seeking government loans to build homes.

According to sources, the Financial Institutions Division of the Ministry of Finance recently sent a directive to BHBFC outlining the new rates. 

Currently, loans for housing projects in Dhaka and Chattogram metropolitan areas, as well as flats in other regions, carry a 9 per cent interest rate, which will rise to 10 per cent. 

Loans for other areas (excluding flats outside Dhaka and Chattogram) will increase from 8 per cent to 9 per cent. Additionally, the interest rate for farmer housing loans in peri-urban areas, upazila headquarters, and adjacent growth centres will rise from 7 per cent to 8 per cent.

BHBFC officials explained that the adjustment reflects the rising cost of funds. With this one per cent increase, we’ll operate at a margin level, avoiding losses, they said. 

Unlike profit-driven banks, BHBFC aims to provide affordable long-term loans at simple interest rates (no compounding) for up to 25 years. 

The corporation offers 11 loan types, including Pallima, Nagarbandhu, Housing Development, Housing Repair, Probasbandhu, Housing Equipment, Farmers Housing, Government Employee, Flat, Flat Registration, and Swapnonir loans.

Borrowers must contribute 10 to 30 per cent of the project cost, with BHBFC financing the rest—up to Tk 20 million for elite areas in Dhaka and Chattogram. For a Tk 10 million project, for instance, borrowers need Tk 2–3 million upfront, with BHBFC covering Tk 7–9 million.

On Monday, March 3, BHBFC General Manager Md Tofail Ahmed told Jago News, “The board and the ministry have approved the one per cent increase. We’ll issue a circular next week to implement the new rates.” 

Addressing the reason, he added, “We don’t aim for profit, which is why our rates are lower than other institutions. But with the rising cost of funds, this adjustment is necessary.” 

He confirmed that the increase keeps BHBFC at a break-even level, not a loss.

Updated loan details

Pallima: For house construction and flats outside Dhaka and Chattogram metropolitan areas. Current rate: 8% (new: 9%). Max loan: Tk 2 crore, 20-year term. Requires 20% personal funds.

Nagarbandhu: For Dhaka and Chattogram metropolitan residents with approved house designs. Current rate: 9% (new: 10%). Max loan: Tk 2 crore, 20-year term. Requires 20% personal funds.

Housing Development: For multi-storey buildings with at least one floor self-funded. Current rate: 9% in Dhaka/Chattogram (new: 10%), 8% elsewhere (new: 9%). Max loan: Tk 2 crore, 20-year term. Requires 20% personal funds.

Housing Repair: For repairs in Dhaka, Chattogram, and other divisional/district headquarters. Current rate: 9% in Dhaka/Chattogram (new: 10%), 8% elsewhere (new: 9%). Max loan: Tk 25 lakh, 15-year term. No personal funds required.

Probasbandhu (Expatriate Friends): For expatriate Bangladeshis. Current rate: 9% in Dhaka/Chattogram (new: 10%), 8% elsewhere (new: 9%). Max loan: Tk 5o lakh– Tk 2 crore million, 25-year term. Requires 30% personal funds.

Housing Equipment: For multi-storey buildings in key areas. Current rate: 9% in Dhaka/Chattogram (new: 10%), 8% elsewhere (new: 9%). Max loan: Tk 35 lakh, 20-year term. No personal funds required.

Farmers Housing: For peri-urban and rural farmers. Current rate: 7% (new: 8%). Max loan: Tk 30 lakh, 25-year term. Requires 20% personal funds.

Government Employee: For permanent government staff. Current rate: 9% (new: 10%). Max loan: Tk 75 lakh, 20-year term. Requires 10% personal funds.

Flat Loan: For flat purchases across regions. Current rate: 9% (new: 10%). Max loan: Tk 1.5 crore, 20-year term. Requires 25% personal funds.

Flat Registration: For flat registration costs. Current rate: 9% (new: 10%). Max loan: Tk 15 lakh, 5-year term. No personal funds required.

Swapnonir: For educators, health workers, and low-income public employees. Current rate: 8% (new: 9%). Max loan: Tk 27 lakh, 25-year term. Requires 10% personal funds.