Buying a house is now easier!" Bangladesh Bank's new circular

Bank loans play a vital role in fulfilling the dream of owning a house or apartment. Recently, Bangladesh Bank issued a new circular bringing significant changes to the housing loan policy. This new directive makes the loan limits and conditions much clearer and more specific than before.

For those planning to purchase a home, understanding these new rules is essential.

1. How much money can a bank lend?

Under the new rules, banks can no longer determine loan amounts arbitrarily. From now on, the maximum loan an individual can receive depends on the financial health of the bank. Specifically, the limit is based on the bank's Non-Performing Loan (NPL) ratio (the percentage of bad loans).

Bangladesh Bank has divided this into three categories:

• NPL 5% or less: If a bank is in good financial condition with a default rate of 5% or less, it can offer a customer a maximum housing loan of BDT 4 Crore.
• NPL between 5% and 10%: If the bank's default rate is greater than 5% but less than 10%, the maximum loan limit is BDT 3 Crore.
• NPL greater than 10%: Banks with a default rate exceeding 10% cannot lend more than BDT 2 Crore to a single customer.

In simple terms: The better the bank's performance, the higher the loan amount you can secure from them.

2. Debt-Equity Ratio (Bank vs. Customer Contribution)

The bank will not finance the entire cost of the property. According to the new directive, the investment ratio for property purchases is set at 70:30.

• The Bank provides: Maximum 70% of the total property value.
• The Customer provides: At least 30% of the total property value.

Example: If you want to buy a flat worth BDT 1 Crore, the bank will lend you a maximum of BDT 70 Lakhs. You must arrange the remaining BDT 30 Lakhs from your own funds.

3. Eligibility and Conditions

Getting a loan isn't just about the bank's capacity; the bank will also verify your capacity as a customer. The circular clearly states that banks must ensure two things before sanctioning a loan:

• Monthly Income: The customer must have a regular and valid source of income.
• Repayment Capacity: The bank will verify whether the customer has enough surplus money left to pay the monthly installments (EMI) after covering their own and their family's living expenses.

4. Significance

This new policy is a positive signal for the real estate sector. It encourages high-performing banks to offer larger loans. Simultaneously, it pushes banks to reduce their default rates so they can qualify to offer higher loan limits.

Conclusion: These new rules from Bangladesh Bank are effective immediately. If you are considering buying a home as a long-term investment, this is the right time. You can contact your preferred bank to check your eligibility and the maximum loan amount available to you.

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