Govt report proposes 3.5% interest subsidy on home loan for civil servants

A proposal for new home loan facilities for civil servants will make the banking and real estate sectors more vibrant, according to a draft report submitted to the Finance Division recently. The report suggests that the government provides an annual interest subsidy of Tk700 crore to Tk980 crore on home loan allocations. Of the subsidies, 3.5% interest will be borne by the government and 5% by civil servants. Under the proposal, the maximum ceiling for home loans will rise to Tk75 lakh and the total loan amount will be Tk20,000 crore to Tk28,000 crore. “Since the banking and real estate sectors are not in a good shape, the investment by around 2.1 million civil servants will rejuvenate the sectors,” a Finance Division official said, requesting anonymity. Civil servants who have only 15 years to serve will enjoy the government home loan facilities. “The government hopes that corruption among civil servants will drop significantly if they own an apartment as they retire,” the official said. An official in the Finance Division said a committee formed in August last year recommended an 8% interest rate on the loan, of which 3.5% interest subsidy will be provided by the government while borrowers will repay the rest. The sub-committee recommended a total interest subsidy of Tk950 crore, the official told the Dhaka Tribune. He added that the county’s banking sector currently has an amount of Tk130,000 crore in “idle money”. Rehab vice-president Liaqat Ali Bhuiyan said the idle money in the banks should be used for building homes for state employees. “If the government provides land at low price, realtors will offer 600-700 square feet apartments at up to Tk20 lakh for civil servants,” he said.   The Finance Division’s final report will be submitted to the cabinet committee for its consent to implement the policy. The proposal was recently submitted to the Finance Division Additional Secretary Nazmul Sheikh, but he did not agree with the sub-committee proposal, terming it  “illogical”. According to the latest sub-committee proposal, the home loan may have a ceiling of Tk75 lakh for Dhaka City Corporations, Tk60 lakh for other district towns and Tk50 lakh for rural areas.  The loans are only for officials who are at the fifth grade and above. Besides, sixth and ninth grade civil servants may have a ceiling of Tk45 lakh for rural areas, Tk55 lakh for district towns and Tk65 lakh for Dhaka city corporations and divisional towns. A home loan ceiling of Tk55 lakh and Tk40 lakh was suggested for Dhaka metropolitan and city corporation areas and other divisional towns for 13th and 10th grade officials while home loan ceiling will be Tk30 lakh in rural areas. The proposed loan ceiling for 17th to 14th grade officials is Tk40 lakh for Dhaka metropolitan and city corporation areas, Tk30 lakh for divisional towns and Tk25 lakh for rural areas. The proposed home loan ceiling for 18th and 20th grade employees should be Tk20 lakh in rural areas, Tk25 lakh in district towns and Tk30 lakh in Dhaka metropolitan and city corporation areas. Senior finance Secretary Hedayet Ullah Al Mamun said he was trying hard to finalise the policy and a separate civil servant pension fund as a “top priority”. The Public Works Ministry sent another proposal of Tk500 crore to the Planning Commission for providing loans for civil servants to buy flats last year. According to the Finance Division, there are currently 477,000 first class officers, 131,000 second class employees, 1.228 million third class and 267,000 fourth class employees in the country.