B Mirror Report : Considering the rising prices of construction materials and the steadily growing demand in the real estate sector, Bangladesh Bank has redefined the maximum limit for housing loans.

On Tuesday (6 January), the central bank issued a circular amending Clause 23 of the Prudential Regulations related to consumer credit.

According to the circular, the maximum amount of housing loan that a bank can provide to a single customer is now directly linked to the bank’s capacity to manage its existing housing loan portfolio.

The directive states that banks with classified (non-performing) housing loans of 5 percent or less will be allowed to provide loans of up to BDT 40 million. Banks whose classified housing loans are more than 5 percent but within 10 percent will be able to approve loans of up to BDT 30 million. Banks with classified housing loans exceeding 10 percent will be allowed to provide a maximum of BDT 20 million.

Bangladesh Bank has kept the maximum loan-to-equity ratio for housing loans unchanged at 70:30. At the same time, banks have been strictly instructed to ensure that borrowers have sufficient net cash income to repay the scheduled installments.

Issued under the authority of Section 45 of the Bank Company Act of 1991, this policy will replace the previous directives issued in 2004 and 2019.

Although the housing loan limit has been revised, all other existing guidelines related to consumer loans will remain unchanged. It is expected that this decision will provide some relief to prospective homeowners who are under pressure due to rising construction costs. At the same time, the policy change is expected to encourage banks to keep non-performing loan ratios low.