High housing costs put bank loans in focus

Soaring construction and property costs are making long-term bank financing an increasingly important option for Bangladeshis looking to build homes on their own land, with lenders offering housing loans of up to Tk4 crore and repayment tenures of as long as 25 years.

Building even a modest house now routinely approaches Tk1 crore. Under typical terms, a landowner with Tk30 lakh in savings must borrow the remaining Tk70 lakh – subject to income, property valuation, and repayment capacity.

However, financing remains expensive. Major banks quote home loan rates between 9% and 11.50%, with variable rates leaving borrowers exposed to future cost hikes.

Offerings vary across major institutions. City Bank covers property purchases, construction, and renovations from Tk5 lakh to Tk4 crore, financing up to 70% of the property value over tenures ranging from one to 25 years at prevailing market rates. 

Meanwhile, Prime Bank offers starting rates at 8.99% for loans up to Tk4 crore across 25 years, covering up to 70% of property purchase costs for resident Bangladeshis and up to 75% for non-resident Bangladeshis.

The bank also offers zero processing fees on loan takeover facilities and financing for under-construction properties through tripartite agreements.

UCB’s residential housing lending rate ranges from 11% to 11.50%, with its flat-purchase loan rate at 11.25%. The bank finances home or flat purchases, construction and renovation, as well as housing loan takeovers.

BRAC Bank uses a variable pricing model rather than a single headline home-loan rate. Its retail loan base rate was 9.11% in August 2026, with the final rate determined by adding a customer-specific fixed margin.

The base rate is reviewed every six months, while the margin remains fixed over the loan tenure. 

This structure shifts part of the interest-rate risk to borrowers. Even when the customer’s margin remains unchanged, a change in the base rate can alter the effective borrowing cost.

BRAC Bank offers Home Credit for purchasing apartments or houses as well as constructing, renovating and extending homes. It also provides takeover facilities for loans from other banks and non-bank financial institutions.

Eastern Bank’s Islamic Home Finance offers loans ranging from Tk5 lakh to Tk4 crore for apartment purchases, home construction and renovation, with financing of up to 70% of the property value and a maximum tenure of 25 years. 

Advance or partial prepayment and grace-period or moratorium facilities are also available.

Dhaka Bank offers housing loans of up to Tk2 crore for a maximum tenure of 25 years under a 70:30 financing structure. 

Its Home Loan covers flat purchases, construction, renovation and the takeover of existing housing loans. Processing fees vary according to loan size, while early and partial settlement charges apply.

Dutch-Bangla Bank also offers financing of up to Tk4 crore for as long as 25 years. Its facility covers property purchases, construction, extension, renovation and loan takeovers.

Construction and renovation loans can be disbursed in stages, allowing borrowers to draw funds as work progresses.

Bank Asia’s conventional Home Loan offers financing ranging from Tk5 lakh to Tk4 crore for up to 25 years. It provides up to 70% financing, charges a 0.5% processing fee and offers a grace period of up to 12 months, along with partial or full settlement facilities.

MTB’s Home Loan carries a mid-rate of 10.50%, with a published range of 9.50% to 11.50%, effective from 2 September 2026.

The 70:30 financing structure adopted by several lenders has a direct implication for households: even after securing a sizeable bank loan, borrowers need substantial cash upfront.

For a Tk1 crore property, 70% financing means Tk70 lakh from the bank and Tk30 lakh from the customer. But the actual upfront requirement is higher because registration, stamp duty, legal verification, valuation, processing and other transaction costs are generally separate from the property price.

For middle-income households, this creates a financing paradox. A bank may be willing to finance most of the property, but the borrower must first have enough savings to meet the equity requirement and associated costs.

Home loans therefore become more accessible to households with existing savings but do not eliminate the affordability barrier for those with limited capital.

The availability of repayment periods of up to 25 years can make large loans more manageable by spreading payments over a longer period. But lower monthly instalments come at the cost of a larger cumulative interest bill. The longer the loan remains outstanding, the greater the total amount a borrower may have to repay.

This is particularly important in a market where interest rates are not uniformly fixed. For variable-rate facilities, changes in the base rate can increase the borrower’s effective interest rate and potentially raise future instalments.

Another shift in the housing finance market is the broader use of loans for construction and improvement of existing properties.

Banks now finance construction on customers’ own land, as well as renovation, extension and refinancing of existing housing loans.

Staged disbursement is particularly relevant for construction because borrowers can draw funds according to the progress of the project rather than taking the entire loan at once.

Banks are increasingly helping households convert land ownership into home ownership by financing a significant portion of construction and property purchase costs.

But the financing model still leaves borrowers facing three major pressures: a sizeable upfront equity requirement, high long-term interest costs and, in some cases, the risk of changing interest rates.