In response to the rising costs of construction materials and growing demand in the real estate sector, Bangladesh Bank has officially recalculated the maximum limits for housing loans.

The central bank issued a circular on Tuesday (January 6), amending Rule 23 of the Prudential Regulations for Consumer Financing.

New Performance-Based Loan Limits

Under the new guidelines, the maximum amount a bank can lend to a single customer for housing is now directly linked to the bank's ability to manage its existing housing loan portfolio.

The limits are categorized as follows:

• Up to Tk 4 Crore: Available from banks where classified (defaulted) housing loans are 5% or less.
• Up to Tk 3 Crore: Available from banks where classified housing loans are between 5% and 10%.
• Up to Tk 2 Crore: The limit for banks with a classified housing loan rate exceeding 10%.

Key Conditions and Regulations

While the loan ceilings have been raised, the central bank has maintained the Debt-Equity Ratio at 70:30. This means borrowers must still provide 30% of the property value from their own funds.

Additionally, Bangladesh Bank has issued strict directives to commercial banks to ensure that borrowers possess sufficient net cash income to meet their monthly installment obligations.

These new regulations, issued under the authority of Section 45 of the Bank Company Act, 1991, replace previous guidelines set in 2004 and 2019.

Impact on the Market

The policy shift is expected to provide relief to prospective homeowners who have been struggling with inflated construction costs.

Furthermore, by linking loan ceilings to performance, the central bank aims to incentivize commercial banks to keep their default rates low.

All other existing instructions regarding consumer financing remain unchanged.