DFIM Circular No. 02: Compliance of Related Rules and Regulations for Financing and Purchasing Leasing Building Apartment Floor Space by Financial Institutions

DFIM Circular No. 02: Date: 12 May, 2013
29 Baisakh, 1420

To,
All Chief Executive/Managing Directors,
All Authorized Financial Institutions operating in Bangladesh.

Dear Sir,

Subject: Compliance of relevant laws and regulations in the sector of financing for construction of residential and commercial buildings/structures, land development, and purchasing of buildings/apartments/floor space, and for purchasing/leasing buildings/apartments/floor space for own use.

With reference to the subject cited above, it is brought to your attention that in the case of financing (loan, investment, lease, etc.) by financial institutions for the purpose of construction of residential and commercial buildings/structures, land development, and purchasing of buildings/apartments/floor space, it must be ensured that the following laws and regulations are duly complied with by the borrower individuals/institutions:

A. The Building Construction Act, 1952;
B. The Environment Conservation Act, 2006;
C. The Bangladesh Environment Conservation Act, 1995;
D. The Environment Conservation Rules, 1997;
E. The Fire Prevention and Suppression Act, 2003; F. The Private Residential Project Land Development Rules, 2004; G. The Local Government (Pourashava) Act, 2009; H. All other applicable laws and regulations.

In this regard, you must ensure that the relevant project of the borrower individual/institution has obtained the necessary approval from the National Housing Authority, Capital Development Authority (RAJUK), Chittagong Development Authority (CDA), Khulna Development Authority (KDA), Rajshahi Development Authority (RDA), City Corporation, or Pourashava.

To achieve the purpose of this circular, you are also advised to duly comply with the following guidelines:

1. No loan/lease facility shall be approved for the land development of private residential projects without statutory body approval, construction of buildings in such residential projects, or for purchasing flats/spaces in such constructed buildings.

2. In cases where financing has already been done in constructed/under-construction buildings/structures, it must be ensured that the aforementioned laws and regulations are duly complied with and necessary approvals are obtained from the relevant statutory bodies.

3. If any financial institution has already distributed loans in favor of residential projects without the approval of RAJUK and other statutory bodies, the mortgaged property shall not be released until the full amount is recovered.

Department: DFIM dfim@bb.org.bd dfim.finmarkets@bb.org.bd

Department of Financial Institutions and Markets Bangladesh Bank Head Office Dhaka.

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4. Financial institutions must verify through site inspection whether the land developer (individual/institution) is using the loan of the financial institution for land other than the mortgaged land of the housing project kept in the financial institution or for another housing project.

5. In the case of construction and purchase/lease of own buildings/structures by financial institutions and for properties already constructed, purchased, or leased, it must be ensured that the aforementioned laws and regulations are duly complied with and necessary approvals are obtained from statutory bodies. All financial institutions are required to submit a compliance report to this department by June 30, 2013.

These instructions shall be implemented immediately.

Yours faithfully,

(Md. Sohrawardy)
General Manager
Phone: 9530178