ADB finds high reg, land costs key constraints

High reg, land costs key housing finance issues for lower, middle classes
Sayeed Muhammad of DOT: The Asian Development Bank (ADB) has identified several obstacles that prevent the lower and middle-class from getting access to housing finance.
The constraints are weak legal enforcement in mortgage market, supply-side challenges, inadequate incentives, and rising construction cost, reports the Financial Express.
The engagement of multiple institutions, gaps in regulatory process and enforcement, high registration costs, poor land availability and high land prices as other barriers, it found.
The ADB cited these factors in a feasibility study on constraints to housing finance access to low-and middle-income households in Bangladesh and submitted it to the government.
According to ADB, though Bangladesh’s economic growth has accelerated steadily in recent decades and it has urbanised rapidly, access to housing for the low-and middle-income households (LMIH) remains a challenge.
Permanent houses constitute only 19% of dwellings in Bangladesh. Only 7.0 % of rural households and 33 % of urban households live in permanent houses, the ADB said.
Between 2011 and 2016, households’ living under a concrete roof increased only marginally from 10.4 % to 11.1% of all households, and despite a low base, the pace of change has thus been slow, it noted.
The ADB study noted formal private sector caters largely to the top-end of housing demand-1,000 square feet and above-and is concentrated on major urban centres like Dhaka and Chittagong.
The ADB said a concentrated policy push from the government to expand affordable housing is necessary and at the same time can yield positive economic impacts.
It suggested taking a phased approach towards the development of the housing finance sector.
The ADB in this case proposed providing a sovereign loan and grant-based technical assistance for setting up of a refinancing window for financial institutions targeting LMIH housing.
It also proposed extending a blended financing with longer-term corporate bonds for developing housing finance for lower and middle income segment of people.