WASHINGTON, D.C., Oct. 15—The President of the World Bank Group, Mr. James D. Wolfensohn, today signed for the International Finance Corporation (IFC) to become an equity partner, together with Housing Development Finance Corporation (HDFC) of India, in the recently established Delta Brac Housing Finance Company (DBH). Signing on behalf of the Bangladeshi sponsors of the company were Mr. Shafat A. Chaudhuri, Managing Director, Delta Life Insurance; Mr. F.H. Abed, Executive Director, BRAC; and Mr. Nasir. A. Choudury, Managing Director, Green Delta Insurance. Signing on behalf of HDFC was Mr.Deepak Satwalekar, Managing Director, HDFC.
DBH will pioneer private sector housing finance in Bangladesh with technical assistance from HDFC. It will provide home mortgage loans of up to fifteen years for owner occupied houses and apartments and plans to launch a deposit scheme shortly, particularly for future prospective home owners.
The urban population of Bangladesh, especially its capital city Dhaka, has experienced explosive growth for over two decades with consequent overcrowding and an acute shortage of housing. The amount of new construction undertaken every year is limited. The provision of additional funds for housing will increase the overall housing stock as well as opportunities for home ownership, thus leading to improved maintenance and healthy conditions in the home. The home construction industry is expected to respond very positively to the availability of funds by focusing on building smaller, more affordable units. Through upgrading of construction practice, construction costs are also likely to be reduced. In Bangladesh, the construction industry is a significant employer of the economically disadvantaged urban population.
Mr. Rashad Kaldany, Director of IFC's Asia II Department said, "Housing and the attendant urban infrastructure required to support adequate living conditions are amongst the urgent problems facing Asian cities today. This initiative will help to address the pressing housing challenge in Bangladesh. We are also very pleased to be associated with strong partners in this project."
IFC will make an equity investment of about US$750,000 for 15 percent of DBH's share capital. IFC, the private sector arm of the World Bank Group, is the world's largest multilateral source of equity and loan financing for private sector projects in developing countries.
HDFC, the leading housing finance company in India, has been very successful in pioneering housing finance, having assisted over 1 million home owners in its twenty years of existence. HDFC's experience in India is that private sector housing finance has had a significant impact on the availability of small living units and that individuals, in anticipation of buying a home, significantly increase their personal savings -- thereby making an important contribution to raising the country's savings rate.
Delta Life and Green Delta each constitute one of the leading private sector companies in the insurance sector. BRAC, a Bangladeshi non-governmental organization, is well known in the area of rural development.
