A REVIEW OF THE INSTITUTIONAL HOUSING FINANCE SITUATION IN THE URBAN AREAS OF BANGLADESH

Provision of financial assistance is recognised as a way of bringing t he cost of housing within affordable limits. Worldwide, specialised ho using finance institutions have been developed for that purpose. Never theless, the provision of institutional housing finance in Bangladesh is still grossly inadequate. Housing costs are beyond the reach of mos t of Bangladesh's urban population. This is one of the major causes of the massive housing shortage in its urban areas. As a consequence, mo re than a quarter of the country's urban households are forced to live in slums. The housing finance sector has been neglected by both the g overnment/policy makers and the banking community. Until now, the only specialised housing finance institution was in a stagnant condition d ue to lack of funds, a low recovery rate and misconceived policies. Ta lk of establishing a new housing bank to provide easy-term mortgage lo ans for urban households by procuring funds from overseas lending agen cies is now becoming increasingly more popular. Thus, it is necessary to make these agencies see such a scheme as a safe investment, providi ng finance preferably for social housing, in addition to generating mo re funds in the housing sector from domestic sources by other measures for the purpose of commercial lending. This paper presents an overvie w of the institutional housing finance situation in Bangladesh. It exa mines the contributions of financial institutions, housing societies a nd government schemes in urban housing finance and evaluates the perfo rmance of the country's only specialised housing finance institution. It also assesses the possibility of obtaining external funds for housi ng and related development activities. It concludes with a discussion of ways to increase institutional housing finance in the urban areas o f Bangladesh, and makes recommendations towards that in general and ho using finance for low- and middle-income groups in particular.