BRPD Circular No. 02: Financing in private land development projects approved under Private Housing Project Land Development Rule 2004 and projects approved under Local Government (Paurashava) Act 2009

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka.

Baisakh 04, 1420 BRPD Circular No.-02 Date: ------------------- April 17, 2013

Chief Executive All Scheduled Banks operating in Bangladesh.

Dear Sir,

Bank financing for land development of private residential projects, building construction, etc., and proposed projects following designs approved by the Paurashava (Municipality).

It is observed that banks are distributing loans for land development of private residential projects without the approval of statutory bodies, building construction in such projects, and purchasing flats in constructed buildings. Furthermore, during bank financing for the development of infrastructure and construction of buildings by banks and investment institutions themselves, as well as for infrastructure development and construction of any institutional or individual project, Paurashava approval is not being obtained in full compliance with the Local Government (Paurashava) Act, 2009, which is contrary to sound banking practices.

In this context, banks shall duly comply with the following conditions prior to financing land development of private residential projects and infrastructure development, building construction, or reconstruction of any proposed project:

1. (a) No loan/credit facility shall be approved for land development of private residential projects without the approval of statutory bodies, building construction in such residential projects, or purchasing flats in constructed buildings.

(b) Before distributing loans for land development of approved residential projects, it must be ensured that the residential project is being implemented in accordance with all conditions and guidelines mentioned in the Private Housing Project Land Development Rule, 2004.

(c) It must be ensured through physical inspection whether the land developer is using bank loan funds for land other than the mortgaged land of the housing project kept with the bank or for any other housing project.

(d) If loans have already been distributed by banks in favor of residential projects without the approval of Rajuk and other statutory bodies, in such cases, the mortgaged properties shall not be released until the full amount of the distributed loans is recovered.

2. Furthermore, financing shall be provided for projects approved by the Paurashava in accordance with the description in Section 50(1)(g) of the Local Government (Paurashava) Act, 2009, and Serial Numbers 35 and 36 of the Second Schedule of the same Act, for infrastructure development, building construction, or reconstruction of any project by all government, autonomous, and private institutions, including individuals.

This directive shall take effect immediately.

Yours faithfully,

(K. M. Abdul Wadud) General Manager Phone: 7117825